04 June 2025
Maintaining regular savings habits and paying off credit card debt on time are two stable financial behaviours that significantly lead to improved mental health, University of South Australia finance experts have found.
New UniSA research has revealed that stable financial habits can significantly contribute to improved mental health, which in turn can lead to higher productivity and employment. This was found to be true across all socioeconomic demographics.
Researchers explored data from the Household, Income and Labour Dynamics in Australia (HILDA) survey database, comprising the socioeconomic status, physical and mental health, labour market dynamics, family conditions and life experiences of more than 17,000 Australians aged 15 years and over from 2001 to 2021.
Upon examining the data, researchers found that people who practised stable financial behaviours, such as regularly saving money and paying off credit card payments on time, reported increased mental health as well as vitality, social functioning and general wellbeing.
Professor of Applied Economics and member of UniSA's Centre for Markets, Values and Inclusion Rajabrata Banerjee says while the link between financial behaviours and mental health is already known, research into patterns of consistent behaviour and the impact on mental health was lacking.
“We already know that having high debt and low savings has a negative impact on mental health, but we wanted to learn more about the positive financial behaviours – such as how regularly someone saves or pay off their debt – that may reduce financial strain and cause less worry about money and better mental health,” he says.
“Considering Australians are already facing cost-of-living pressures, and the ongoing mental health crisis since the COVID-19 pandemic, we wanted to investigate what part positive financial behaviours can play in significantly altering mental health.
“We found that people who are saving and regularly putting money aside have the best mental health. Those who don’t save at all had the worst mental health. In terms of paying off credit card debt, the same principle applies.”
To examine the effect of cost-of-living pressures, the study also investigated whether financial burden was a factor that influenced regular savings and debt behaviours. Financial burden was measured by the cost of utilities like electricity, gas and water, adjusted based on how close someone is to retirement.
“The study found that sharp increases in utility prices placed a greater financial burden on younger people, who typically have low savings and high debt. This burden further strains their finances and negatively impacts their savings and debit behaviours and mental health,” Prof Banerjee says.
“The study also found that the positive impact of savings behaviour on mental health was stronger for men than women, indicating that, in Australia, financial management is still dominated by men, therefore resulting in a greater impact for that group.”
However, the study found that stable financial behaviours led to good mental health irrespective of whether an individual is from a higher or lower socioeconomic background, signifying that even saving a small amount when expenses are high, can lead to better mental health.
Prof Banerjee says financial hardship can be a profoundly disheartening experience that can have a detrimental effect on someone’s mental health as well as their long-term economic interests.
“When individuals are financially strained, they often can’t save as much or invest, so they miss out on growth and meeting those goals they might have set for the future. People can also become reliant on borrowing to meet their basic needs, and this can lead to high interest payments and continuous debt cycles,” he says.
“That’s why healthy financial behaviour is important to build stability and long-term security, allowing goal achievement, independence and access to opportunities, as well as reduced stress and good mental health.”
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Contact for interview: Raj Banerjee, Professor of Applied Economics, UniSA E: rajabrata.banerjee@unisa.edu.au
Media contact: Melissa Keogh, Communication Officer, UniSA M: +61 417 361 403 E: Melissa.Keogh@unisa.edu.au
