Low household income, financial literacy, or financial health: Which is the strongest risk factor and outcome of depressive symptomatology?

Background: Depression's relations to psychosocial processes are complex, bidirectional, and include financial functioning. The current study compared the extent to which household income, financial literacy (knowledge and skill), and financial health (saving, spending, borrowing, and planning behavior) were risk factors and outcomes of depression.

Methods: A United States national sample of working-aged adults (N = 6565) completed self-report measures of financial functioning and depression in years 2020 and 2022. Depression scales assessed both negative (depressive symptoms) and positive (life satisfaction) affective dimensions.

Results: Lower income, less financial literacy, and especially poorer financial health correlated significantly with more depressive symptoms and lower life satisfaction. Poorer financial health demonstrated the strongest prospective relations with increasing depressive symptoms and decreasing life satisfaction over the two-year retest interval. In parallel, higher depressive symptoms and lower life satisfaction each predicted subsequent decreases in financial health.

Limitations: Results from this longitudinal, observational study suggested but could not establish causal connections between depression and financial functioning. The study's novel results require replication before clinical application.

Conclusions: More so than low income or limited financial literacy, poor financial health is both a risk factor and potential outcome of depression, including more depressive symptoms and lower life satisfaction. If these findings are replicated, financial health may be an important research and clinical target for depression assessment, prevention, and treatment.