Financial Literacy and Mental Health: Empirical Evidence from China

Naijie Guan*, Alessandra Guariglia, Patrick Moore, Hareth Al-Janabi

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

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Abstract

Background and Objective
While financial literacy is a plausible determinant of mental health, there are relatively few studies exploring the relationship between financial literacy and mental health, and the existing literature focuses on a single construct of financial literacy in high-income settings. Our study addresses this by investigating whether there is an association between financial knowledge, attitudes, and behaviours and mental health in Chinese adults.

Methods
We use data from the China Family Panel Studies, a nationally representative longitudinal survey. Mental health is measured using the Kessler Psychological Distress Scale (K6) and financial literacy is assessed using a unique module on financial literacy covering financial knowledge, financial attitudes and financial behaviours.

Results
We found that overall financial literacy and two of its dimensions (financial attitudes and financial behaviours) are always positively associated with mental health. A positive association between basic financial knowledge and mental health is also apparent but is mediated by households’ finances. Our results are robust to using different outcome variables and estimation methods. Finally, we found that compared with their counterparts without debt, indebted respondents show a stronger sensitivity of mental health to basic financial knowledge, as well as a significant association between advanced financial knowledge and mental health, which persist when we control for households’ finances.

Conclusions
Our findings suggest that investments in financial education might significantly benefit mental health in Chinese adults. This is especially the case among indebted adults.
Original languageEnglish
Pages (from-to)833-847
Number of pages15
JournalApplied Health Economics and Health Policy
Volume22
Issue number6
DOIs
Publication statusPublished - 30 Jul 2024

Bibliographical note

Publisher Copyright:
© The Author(s), under exclusive licence to Springer Nature Switzerland AG 2024.

Research Groups and Themes

  • HEHP@Bristol

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