The Correlation between Anxiety and Money Management

Abstract

Finances are frequently cited by college administrators as a top cause of college student stress and drop out. Positive financial behaviors can help prevent financial stress and possibly help with college student retention rates. According to past research, financial behaviors can be predicted based on certain demographic characteristics, resource availability, and financial knowledge. One of the gaps in the literature revolves around the impact that anxiety plays in positive and negative financial behaviors. Students who are anxious are sure to be experiencing a high degree of stress. Using primary data collected from students attending a large Midwestern university, results indicate that anxiety has a significant effect on three financial behaviors. Implications suggest that college financial counseling and mental health programs collaborate to provide holistic services to students which may help to retain students due to financial stress and anxiety. Keywords: Mental Health Distress, Financial Therapy, Financial Behaviors Introduction According to McCormick (2009), an increasing number of financial stressors for individuals and families have been created due to the recession, such as rising fuel and food prices, mortgage and credit crises, increased unemployment, increased bankruptcy filings, and a reduction in savings. Financial distress has been described as an individual's reaction to the condition of their personal financial situation (Prawitz, Garman, Sorhaindo, O'Neill, Kim, & Drentea, 2006). Overdue notices from creditors, check writing with insufficient funds, late bill payments, family arguments about money, and lack of emergency preparedness are financial behaviors that may contribute to financial distress (O'Neill, Prawitz, Sorhaindo, Kim, & Garman, 2006). Furthermore, effects of financial distress have been found to include anxiety, insomnia, headaches, and depression (O'Neill, Sor haindo, Xiao, & Garman, 2005c). Prolonged financial stress has been shown to produce a negative impact on physical and mental health (Kim, Garman, & Sorhaindo, 2003) and general sense of financial well-being (Weisman, 2002). The purpose of this study was to determine how anxiety is related to financial behaviors. Results provide support for the need for financial therapy since anxiety was found to be highly related to the manner in which people handle their money. Literature Review and Conceptual Framework The themes that have emerged in the literature as known predictors of financial behavior include background characteristics, resource availability, and financial knowledge. The unique contribution of this study is to determine how anxiety influences financial behaviors. Positive and negative financial habits that form when individuals transition to adulthood are likely to continue throughout their adult years (Shim, Barber, Card, Xiao, & Serido, 2009). Since college is considered a transitional time where students face many challenges, including those regarding financial issues, this study concentrates on the impact anxiety might ultimately have on college students' financial behaviors. The extent of financial behaviors is far reaching. For purposes of this study, the following six behaviors were of interest due to their applicability to college students: (a) awareness of debt load, (b) spending more than is earned, (c) difficulty paying bills, (d) paying credit card bills on time, (e) reaching the maximum limit on credit cards, and (f) using cash advances. Anxiety According to Klontz and Klontz (2009), when individuals are stressed and feel anxiety, fear, or shame, they feel off-balance and the human brain will attempt to repair or rebalance it by seeking out substances or behaviors, which may include food, nicotine, alcohol or a wide range of human behaviors, including financial behaviors. Research shows a clear relationship between economic distress and reduced mental health status (Voydanoff & Donnelly, 1989; Irwin, LaGory, Ritchey, & Fitzpatrick, 2008), although surprisingly little research has been conducted on the relationship among anxiety and financial behaviors in more recent years. …