Financial Literacy & Mental Health Outcome

Balancing Academic responsibilities and maintaining good financial investments are one of the top priorities of many students. Some Financial-related questions and concerns can include: 

“I need to max out my *TFSA this year,” 

“Should I invest my money into a registered *GIC to avoid capital tax gains?” 

“Should I invest in 1 oz bullion or pool my money for a 10 oz?” 

These questions can occupy a student’s mind, particularly students who experience a middle-class lifestyle, as they plan for a down payment for a house or a startup capital for personal ventures. On the contrary, while my family friends are preoccupied with purchasing a summer house in Provence or soireeing in Saint-Tropez, I came across students upon arriving at UTSC who expressed concerns such as:

 “How do I pay my rent and tuition?” 

“How many hours can I work that doesn’t affect my academic performance?”. 

This blog post will examine the substantial impact of financial concerns, on the correlation between socioeconomic status and student's mental health, as well as my proposal for institutional reform that allows students to develop healthy financial literacy in order to make informed financial decisions. 

Social Class as a “Fixed” Health Determinant

What is Socioeconomic status? A study measured socioeconomic status (SES) as “…[L]evels of education, income, occupation, home and car ownership, as well as financial security,” (Barakat & Konstantinidis, 2023, pg. 10).  For this blog, SES will be measured through the lens of a student's parental units. Students of lower SES background or “subjectively lower social class” experienced “poorer mental health” (Li et al., 2023, pg. 11), however, individuals of higher SES background are more likely to be “happier and mentally healthier” due to their access to financial resources. A similar finding was echoed by Straus (2020), who suggested that well-resourced students are more likely to summer in exotic countries, dress in quality tailored outfits and partake in exclusive club membership. For instance, a close friend of mine enjoys a certain lifestyle that is fully funded by her parents; from her tuition, car insurance, condo mortgage, weekly cleaner and a week's worth of travel to Tuscany during reading week, which allowed her to fully invest her time studying. This would imply that their material resources, time and financial opportunities provided by their social network can facilitate their everyday routine and life stages. To exemplify, I have noticed a stark contrast in the daily lives of UTSC.  On one side, there are students who endure long, and at times,  unsafe commutes with public transportations. Meanwhile, others in better socio-economic position tends to engage in conversations focused on significantly different aspects of life, such as growing their investment portfolio and buying a property. The differences in priority structure where a group of students sees education as a path to achieve vertical mobility, enhanced through their various involvement with school clubs and access to internships, whereas their counterparts sees education as a continuation of their family’s pedigree, needs to be studied by emerging scholarships.

Additionally, wealthier students often benefit from parents with high educational credentials and strong human capital that stream them to high-paying careers, providing them with a financial literacy socialization process (Herawati et al., 2020). This class reproduction is intimately linked to the disproportionate institutional inequality amongst racialized, low-income students. In contrast, According to Nguyen (2023), low-income students tend to face financial hardship, ranging from food insecurity, necessity to work long hours to afford basic necessities and inability to access affordable mental health care. For instance, being able to summer in Lake Como or winter in Aspen is a sign of financial security, and that over time generally accumulates into a good mental health credit score. Students who enjoy certain class privileges tend to enjoy certain leisure activities to augment their physical health, such as equestrian and golfing. Students with the finances and proper budgeting can also purchase self-development books, especially in finance, and implement those practises in their daily life. This goal-oriented lifestyle tends to be self-fulfilling as it improves one’s confidence and mastery of everyday life. On the contrary, working-class individuals are more likely to develop cardiovascular health conditions and chronic stress as a result of the expensive cost of living  (Barakat & Konstantinidis, 2023). Economic inequality is deeply racialized as well; first-generation students can experience downward social mobility upon migration and their parental unit may have insufficient knowledge of how the financial institution specifically operates in Canada. This can lead to additional challenges of developing the financial literacy to optimize their investment strategies and build income-generating assets for the next generation. It is important to recognize that social class impacts the educational experiences of students from different class backgrounds, and that the “…[H]ealth benefits of SES accumulate across the life course.” (Barakat & Konstantinidis, 2023, pg. 9). 

Mental Health Outcome

Many literatures have pointed out that SES and health outcomes are intimately linked; generally the higher the SES, the lower the mental health disorders. Barakat & Konstantinidis (2023) explained that social mobility increases their individual purpose, self-acceptance, personal growth and environmental mastery and autonomy (pg. 9). This can be attributed to their financial capacity to engage in self-fulfilling activities to nurture their mental health, such as meditation and yoga classes, as well as the ability to negotiate between choices that are more convenient for themselves. The ability to pursue a consistent level of self-care and self-sufficiency to perform everyday obligation with ease is a privilege. 

Educational reform is needed to mitigate this economic inequality between students. Financial courses should be mandated as early as elementary school. Students should take an active role in their financial literacy journey by delving into financial development books, consulting with a financial advisor to explore investment strategies and portfolio diversification, and initiating productive discussions with their parents about financial matters. As a stepping stone to call for institutional reform, there should be an transparent dialogue about finances in society as it allows us to close the wealth gap and ensure greater economic equality. Keep an eye out for opportunities such as a finance webinar hosted by your local branch; these speakers are employees who will get you adapted to learning different financial strategies and terminologies. Also, consider surrounding yourself with a like-minded social circle to get ahead in your future. You can start by following financial-related content on social media to fuel your motivation to pursue the life you aspire to.

Terminologies: 

1. TFSA (Tax-Free Savings Account); a registered account in Canada that allows individuals to save and invest money without paying taxes on the growth or withdrawals within the account.

2. GIC (Guranteed Investment Certificate); A GIC is a low-risk and stable investment. An individual deposits a certain amount of money with the bank for a fixed term, in which the bank repay the principle amount and principle at the end of the term. 

3. Bullion: precious metals, such as gold and silver that can diversify your portfolio. 

Citations

Barakat, C., & Konstantinidis, T. (2023). A review of the relationship between socioeconomic status change and health. International Journal of Environmental Research and Public Health, 20(13), 6249. doi:https://doi.org/10.3390/ijerph20136249

Herawati, Nyoman T., I. M. Candiasa, I. K. Yadnyana and Naswan Suharsono. 2020. "Factors that Influence Financial Self-Efficacy among Accounting Students in Bali." Journal of International Education in Business 13(1):21-36. doi: https://doi.org/10.1108/JIEB-02-2019-0010

Li, K., Yu, F., Zhang, Y., & Guo, Y. (2023). The effects of subjective social class on subjective well-being and mental health: A moderated mediation model. International Journal of Environmental Research and Public Health, 20(5), 4200. doi:https://doi.org/10.3390/ijerph20054200

Nguyen, D. J. (2023). Low-income students thriving in postsecondary educational environments. Journal of Diversity in Higher Education, 16(4), 497-508. doi:https://doi.org/10.1037/dhe0000360

Straus, C. (2020). The privileged poor: How elite colleges are failing disadvantaged students. Cato Journal, 40(1), 249-250. Retrieved from http://myaccess.library.utoronto.ca/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fscholarly-journals%2Fprivileged-poor-how-elite-colleges-are-failing%2Fdocview%2F2359962893%2Fse-2%3Faccountid%3D14771