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Financial Literacy and Mental Health: Empirical Evidence from China

Author

Listed:
  • Naijie Guan

    (University of Birmingham)

  • Alessandra Guariglia

    (University of Birmingham)

  • Patrick Moore

    (University of Bristol)

  • Hareth Al-Janabi

    (University of Birmingham)

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.

Suggested Citation

  • Naijie Guan & Alessandra Guariglia & Patrick Moore & Hareth Al-Janabi, 2024. "Financial Literacy and Mental Health: Empirical Evidence from China," Applied Health Economics and Health Policy, Springer, vol. 22(6), pages 833-847, November.
    • Handle: RePEc:spr:aphecp:v:22:y:2024:i:6:d:10.1007_s40258-024-00899-9
    DOI: 10.1007/s40258-024-00899-9
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    References listed on IDEAS

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    1. Annamaria Lusardi, 2012. "Numeracy, financial literacy, and financial decision-making," NBER Working Papers 17821, National Bureau of Economic Research, Inc.
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