Start budgeting to be happier: New study reveals surprising link between smart money management and mental health

In an eye-opening new study, finance experts at the University of South Australia have found a surprisingly strong connection between everyday financial habits and mental wellbeing. From regular savings to timely credit card repayments, the research suggests that your wallet and your mind may be more closely linked than you think.

The study titled ‘Understanding the Effect of Financial Behaviour on Mental Health: Evidence From Australia’, based on data from the long-running Household, Income and Labour Dynamics in Australia (HILDA) survey, followed over 17,000 Australians aged 15 and older across two decades. Researchers discovered that individuals who followed stable financial routines — especially those who saved consistently and paid off credit card debt on time — reported not only better mental health, but also higher energy levels, stronger social ties, and greater overall life satisfaction.

Professor Rajabrata Banerjee, an expert in applied economics and a member of UniSA’s Centre for Markets, Values and Inclusion, explains that while the stress of debt has long been known to negatively affect mental health, less attention has been paid to the positive impact of proactive money habits.

“We already know that having high debt and low savings has a negative impact on mental health,” Banerjee said in the university’s official release. “But we wanted to learn more about the behaviors — like how often someone saves or pays off debt — that might reduce financial strain and improve wellbeing.”

A Lifeline Amid Rising Living Costs

The findings couldn’t be more timely. With Australians grappling with rising utility bills and persistent cost-of-living pressures, the financial strain is more real than ever, especially for younger people. The study found that sharp increases in the cost of electricity, gas and water hit younger individuals hardest, since they typically have lower savings and higher levels of debt. This in turn affects their ability to save or pay off debt, triggering a cycle of financial stress and mental fatigue.

Interestingly, the benefits of healthy money habits weren’t exclusive to any particular income group. Whether someone earned a little or a lot, the study showed that consistent saving and debt management offered a mental health boost. Even small savings could make a meaningful difference when done regularly.

Why Men Benefit More And Why That’s Concerning

Another notable finding was the gender gap in financial impact. “The positive effect of savings on mental health was stronger for men than for women,” said Banerjee. This may reflect deeper societal patterns where men are still more often the primary financial decision-makers in households, a factor that can exacerbate gender disparities in both money management and mental health outcomes.

Building a Foundation for the Future

The study makes a compelling case for rethinking personal finance not just as an economic tool, but as a mental health strategy. Financial hardship, Banerjee warns, can lead to a loss of independence, long-term insecurity, and even continuous debt cycles. “When people are financially strained, they often miss out on investing in their future, and that adds to a sense of hopelessness,” he noted. “But healthy financial behaviors create stability, open doors, and significantly reduce mental stress.”

So while therapy, mindfulness, and self-care remain essential to wellbeing, don’t underestimate the quiet power of consistent savings and timely bill payments. Sometimes, peace of mind begins with a balance sheet.