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17 May 2023

Financial Stress

Understanding the impact of financial stress is essential for organisations looking to minimise the impact of the cost-of-living crisis. In this article, we explore the neuroscience of financial worries and offer practical strategies for addressing the challenge.

Financial stress is on the rise, affecting up to 80% of employees (YuLife). Left unchecked, ongoing money worries can have a devastating impact on mental health. For organisations, a surge in financial stress is also bad news. Employees who are stressed about finances are unable to perform at their best as productivity and engagement both decline. Valuable talent may also be lost as people move elsewhere for a higher salary.

When they understand the impact of financial stress, organisations can start to proactively respond. Here, we explore the neuroscience of financial stress and its effects on mental health and work performance. More importantly, we discuss what organisations can do about it.


The Neuroscience of Financial Stress

The sources of financial stress are numerous – mounting debts, economic uncertainty and the pressure to meet financial obligations. This burden can significantly impact one’s well-being and cognitive functioning. Let’s explore the underlying neural mechanisms and behavioural consequences of financial stress, shedding light on how it affects decision-making, emotional regulation, and overall mental health.

Heightened Emotional Response:

When faced with financial difficulties, the brain’s stress response system, primarily governed by the amygdala and the hypothalamus, becomes activated. The release of stress hormones, such as cortisol, can lead to an amplification of emotional reactions. Stressed out individuals may experience increased feelings of anxiety, fear, and frustration. These emotional responses can set in motion a cycle of stress as decision-making processes are impaired.

Impaired Cognitive Function:

The brain regions involved in executive functions, such as the prefrontal cortex, are particularly susceptible to the detrimental effects of financial stress. Memory, attention, and problem-solving can all be impaired. Constant worry about money can consume the brain’s resources, making it difficult to focus on tasks and think creatively.

Altered Reward Processing:

Under the weight of financial stress, the brain’s reward processing mechanisms, such as the dopamine pathway, can be disrupted. This may lead to a diminished response to positive stimuli and an increased sensitivity to negative outcomes. This can have far-reaching consequences, as it becomes more difficult to experience joy and stay motivated.

Chronic Activation of Stress Response:

Financial stress triggers the release of stress hormones such as cortisol. If this is not resolved, the stress response becomes dysregulated with detrimental effects on the body and the mind. Mood, cognition and overall mental health can all be impacted. Memory and learning can suffer, and a range of mental health issues such as depression and anxiety can surface.


The impact of financial stress on business performance

The interplay of employee wellbeing and business performance is well documented. Given the prevalence of financial stress, it’s important to consider the impact this might be having.

Decreased concentration:

Impaired concentration, preoccupation and decreased focus can significantly hinder productivity as errors and inefficiencies creep in.

Strained relationships:

Money-related stress can make people more susceptible to conflict and tension with colleagues, managers or direct reports. Uncharacteristic anger and irritability can spill over into workplace interactions, compromising teamwork and collaboration.

Increased absence rates:

The constant worry and anxiety associated with financial stress can contribute to stress-related illnesses. Employees may be compelled to take more frequent sick leave or personal days to recover from the emotional and physical toll.

Increased attrition rates:

The cost of recruiting and training new employees to replace those who leave can be substantial for businesses. As the burden of financial worries erodes job satisfaction, individuals may actively seek positions with improved financial prospects. Attrition rates can go up, piling on pressure across the business.


Tackling financial stress in the workplace

Beyond paying a fair living wage, employers can take steps to mitigate the risks of financial stress, and foster a supportive culture of financial wellbeing. While there is no one-size fits solution, here are some things to consider.

  1. Flexible compensation packages

Employers can support financial wellbeing by designing flexible compensation packages that meet employee needs. This might include allowing employees to  allocate a portion of their earnings to specific areas of financial concern such as housing, childcare, healthcare, or retirement savings.

  1. Financial education and coaching

74% of employees want greater financial education (PwC), and 59% of employers identify poor financial literacy as a major risk area (WealthAtWork). Organisations can address this by providing financial workshops and coaching tailored to the different needs of individuals. This might include:

  • Graduates – the basics of investing, budgeting, and renting.
  • Millennials – pensions and saving for a home.
  • Working parents – signposting financial support for childcare.

At The Wellbeing Project, we offer a range of financial wellbeing workshops and coaching programmes that can be tailored to each organisation.

  1. Open up the conversation about financial wellbeing

According to Aviva, money is one of the last workplace taboos. Almost three-quarters of employees (73%) have never spoken to their employer or line manager about their financial wellbeing. Remaining silent about money only exacerbates financial stress. Line managers and leaders can break down the stigma by initiating conversations about money.

Recommended strategies:

  • Encourage leaders to be as transparent as possible about business performance.
  • Ensure financial wellbeing is a regular agenda item in 1-1s.
  • Invite leaders and managers to share their own financial experiences.
  • Create employee support groups to share money tips and advice.
  • Offer financial wellbeing group workshops to provide a safe and supportive space to share money worries.



The neuroscience of financial stress reveals the intricate ways in which financial pressures impact individuals and businesses. From impairing cognitive functioning and altering reward processing to straining relationships and increasing attrition and absence rates, financial stress poses significant challenges to both employees and organisations.

Recognising the profound impact of financial stress on individuals’ wellbeing and performance, it becomes imperative for businesses to prioritise strategies that promote financial wellness. By addressing financial stress proactively, organisations can foster a healthier, more resilient workforce and achieve sustainable success in an ever-changing economic landscape.

To dive deeper into this topic, download our quick but high impact guide to financial wellbeing.


About the author

SANDRA ORDEL is a Chartered Occupational Psychologist at The Wellbeing Project. She has extensive consulting experience within a wide range of organisations and industry sectors.

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