The intersecting crises of financial strain and poor mental health among young adults represent a pressing global challenge, particularly in the context of post-pandemic recovery and economic uncertainty. This study investigates the bidirectional relationship between financial difficulty and mental health in young adults aged 16-35 in the UK.
The primary aim is twofold: first, to quantify how financial hardship predicts mental health deterioration, and conversely, how poor mental health can lead to increased financial instability; second, to evaluate the role of public policy, including welfare provisions, and employment support, in mitigating these compounding effects.
Using data from the UK Household Longitudinal Study (Understanding Society), we develop a novel multidimensional measure of financial difficulty. This measure is employed in both multilevel and structural equation modelling to examine the relationship between financial hardship and mental health, as well as the mediating role of pandemic-related policy interventions.
Findings reveal a reinforcing cycle between financial stress and mental health challenges, particularly intensified by insecure employment. Young adults were disproportionately affected by employment transitions and heavily reliant on income support policies during the pandemic.
This research contributes to emerging transdisciplinary work at the intersection of psychology, economics, and public policy. It underscores the urgent need for integrated interventions capable of breaking the cycle of financial strain and psychological distress among young adults, supporting their transition into secure and fulfilling adult lives. The findings are relevant for researchers, policymakers, and practitioners seeking novel approaches to youth mental health and financial resilience.