How much does a Financial Crisis matter?

A financial crisis occurs when there is a sudden and significant disruption in the financial system, leading to economic instability. It often involves a sharp decline in asset prices, banking failures, and a loss of investor confidence, causing widespread economic hardship. Governments and central banks intervene to stabilize the situation and prevent further damage to the economy.

“Money can’t buy you happiness. For everything else there’s….”,
goes a well-known credit card company’s catchphrase. Little did they know that it would remain apt for years to come. It is more apt now than ever before 
I am sure you will agree that it’s beneficial to have money. When spent wisely, money has the potential to accomplish a lot. Many times, having money gives people the ability to do better.

We already know that the prospect of bills piling up and having low purchasing power results in financial stress. ‘Better Up’, a people, experience platform, reported that according to the American Psychological Association (APA), “72% of Americans feel stressed about money at least some of the time.” This may result in chronic stress leading to several physical and mental disorders. 

The concept of wealth accumulation is not something new. Humanity has fought several wars and lost numerous lives, and yet we cannot satiate our needs, or as some may say, our greed. Call it insecurity or being pragmatic but money does give the human species a purpose. It is the much-needed eustress that helps us get out of our beds every morning. And of course, who likes bills piling up in their names?


There are several instruments in the market that promote wealth accumulation. Governments across the globe encourage it. They do this by promoting savings and by raising the benefits for several such savings instruments. for instance, the Indian government gives tax advantages for retirement savings. Entrepreneurs and businesses have introduced newer instruments over time. All aiming at wealth accumulation. Some are riskier than others.

Talking specifically about India, till the 1990s people were highly dependent on government policies and citizens, therefore invested heavily in gold and property. Things have changed since then. Stocks and shares are the most recent ways of wealth accumulation. To understand how a fall in the market impacts mental health, let’s delve a bit into history and talk about the very infamous, Great Depression of 1929.

Discussion over the Great Depression

After the ten-year “Roaring 20s,” when speculators placed leveraged bids on the stock market and drove up prices, it resulted in a sudden fall in the U.S. stock market. The impact of the great depression was catastrophic on the lives of people. Between 1929 and 1933, according to Britannica, industrial production dropped by approximately 47%, the GDP decreased by 30%, and the unemployment rate rose to more than 20%.

As the market fell, so did the people’s overall sense of well-being. The suicide rate went up by more than 30%. Newspapers reported in addition to increasing unemployment, the minorities in America had to contend with rising racial violence brought on by white unemployed citizens vying for the same positions. African Americans and several other ethnicities perished in organized lynching. Compared to women, men experienced more difficulty in coping, as they questioned their sense of self-esteem after becoming unemployed.

Many were reported to walk the streets in search of jobs. As Frederick Lewis Allen, editor of Harper’s Magazine observed, some men gave up entirely because they were so disheartened. Some even abandoned their families so that they did not have to see them suffer. During the Great Depression, women toiled tirelessly to support their families while they faced hardship. Many women sewed clothing and canned food. Additionally, they maintained household finances with care. Pay discrimination based on gender was a frequent and accepted practice.

 As the depression got more intense, the suicide rate went up, resulting increase in admissions to mental hospitals. During that period, state mental hospitals admitted three times as many people as usual. Due to financial constraints, people stopped consulting doctors altogether. Although, on the other hand, the Great Depression also brought out the altruistic side in people. Many individuals showed tremendous compassion to strangers who were struggling. People frequently provided the poor with food, clothing, and a place to stay. Families pooled resources supported one another and tightened relationships among their communities.

As they say, ‘History repeats itself, and so it did, as recently as 2008. However, this time, the global impact of the economic downturn wasn’t limited to America. Several banks shut down, the unemployment rate went off the roof, and international trade declined rapidly. People’s morale fell with every fall in the Sensex. Recent research has linked the 2008 recession to increased stress and poor mental health.

How Financial Strains Add to Mental Illnesses

People are not unaware of the impact of austerity imposed on individuals with mental health issues. As the Royal Society of Medicine notes in its publication quite appropriately. Unsurprisingly, prospective studies demonstrate that unemployment is a causative factor in depression. The likelihood of re-employment and integration into an already-stressed economy would be reduced during a downturn, and the chronically jobless will eventually accrue more debt as a result. Therefore, a decline in the global economy and a resulting drop in quality of living undoubtedly influence mental health and, eventually, physical health.

Global Impacts

Civil conflicts have resulted from the financial crisis, which has overthrown several governments worldwide. The impact, of these wars, on the common masses and the entire community is pernicious. Afghanistan’s healthcare system has been weakened by decades of horrific civil conflict and political upheaval, which has also contributed to the country’s population’s astronomically high prevalence of mental illness.

In a study ‘Impact of the financial crisis on mental health’ by Volkos P and Symvoulakis EK, it was found that some of the most frequent effects of the financial crisis are stress, anxiety, and depression. Researchers conducted this study during the Great Recession of 2008.

The study selected samples from 35 countries, with a major focus on Western economies in Europe and America. According to the findings of this study, certain socio-economic groupings are more susceptible to the effects of economic downturns on their mental health. In 2011, the World Health Organization (WHO) stated that the economic downturn is expected to result in secondary mental health repercussions. Potentially increasing the number of people dying from alcohol and suicide.

Dr. Galen Buckwalter, a research psychologist with 25 years of experience, employs data analytics to investigate how individuals see money. He found people frequently experienced feelings of worry, failure, and loneliness, regarding their finances. They wanted to be responsible for their financial position, but they had allowed their anxiety to push them into a condition of overwhelming fear. 

Social isolation

During a financial crisis, individuals often become socially reclusive. This is because, having a financial crisis often brings down the standard of living, and consequently their status in society. That’s why this sudden drop in purchasing power also impacts a person’s self-esteem. This person now begins to decline invitations and shun social situations not only to save money but also due to his low self-esteem. While this strategy helps in saving but does not do much to help their mental health.


To conclude the current situation looks grim and somewhat like this. Like PTSD, financial stress impairs mental functions, harms physical health, and impairs one’s ability to deal with emotions. When it comes to financial stress the reality, according to, is that 36% of millennials and 23% of adults experience financial stress which is at par with the criteria for PTSD diagnosis. When anxiety grips our brains, accepting the truth about our financial situation and making plans become challenging.

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