Children who live in financial hardship are significantly more likely to be bullied, have anxiety and depression, and develop substance use problems. And those who face chronic financial hardship and experience poverty in their early years are especially at risk for mental health problems.

However, as the Wisconsin Office of Children’s Mental Health (OCMH) reports in its latest fact sheet, Financial Hardship and Children’s Mental Health, there are preventative steps we can take – and clear policy choices that can be made – to alleviate financial burdens for families and improve children’s mental health.

“The brain is an incredibly sensitive organ. A child’s brain, which is still developing through the 20s, is especially sensitive to external stress, including family financial stress,” said OCMH Director Linda Hall. “Fortunately, the brain’s plasticity means positive experiences, healthy families, supportive adults, and caring communities also impact a child’s well-being.”

Given the sharp rise in out-of-pocket costs for behavioral health in recent years, having a child who needs mental health care increases a family’s risk of financial hardship.

“At a time of economic uncertainty, it’s especially important to know that child well-being is dependent on economic well-being. Everyone from state and national leaders to individual doctors, teachers and parents can make a difference. We know what helps children and we must take action,” said Director Hall.

Public policies have a profound impact on childhood poverty, which is directly related to childhood well-being. Programs such as the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), SNAP, Social Security, and housing subsidies are proven strategies to keep children out of poverty. As shown in the fact sheet, child poverty nearly tripled since the expanded Child Tax Credits ended in 2021.

The fact sheet notes that economic pressures are defining young people’s lives and 70% believe they will be worse off financially than their parents. Research also shows that young people with the worst mental health outcomes are those who struggle with basic expenses.

“Our young people are the loneliest generation, the least hopeful, and report alarming mental health problems. To address these concerns, we need to implement effective policies like Child Tax Credits, and we need to provide food and housing assistance so that no child grows up in financial hardship,” said Hall.  

The fact sheet includes recommendations for how parents, policymakers, schools, providers, and communities can support children and families in financial hardship.