A New Mental Health Trend? ‘Peniaphobia’ Is Getting Attention

The word derives from Greek roots meaning“poverty” and“fear” and reflects documented financial stress that researchers have linked to severe mental health consequences. For Gen Z, this anxiety has morphed beyond ordinary financial concerns. It has become an all-consuming dread that shapes daily decisions, damages well-being, and fundamentally alters how this generation approaches adulthood.

Economic Reality Fuels the Fear

The economic fragility of the current age became vividly apparent during the COVID-19 pandemic. Many workers lost their jobs, and many never returned to them after the pandemic was over. Gen Zers were entering the workforce during this period. They entered into a contentious job market with increasing food prices, and rent has exponentially risen since the end of the pandemic.

According to the Federal Reserve Economic Data, Gen Z unemployment stood at 10.5% as of August 2025, compared with 4.3% overall. This gap now demonstrates that young people struggle more than twice as hard to secure employment, even with a degree. Among recent college graduates, data indicate that unemployment rates are now comparable to those of peers who never attended higher education. Four-year degrees no longer guarantee employment, leaving 4.3 million Gen Z classified as NEETs (not in employment, education, or training).

Student Loans and Housing Costs

While unemployment among Gen Zers is rising, so is student loan debt interest. This further compounds the financial burden and subsequently leads to psychological turmoil. The average Gen Z student loan stands at about $22,948 in debt. This debt also accrues interest at an annual rate of 6.72%, growing faster than that of any other generation.  Roughly 13 million Gen Zers carry student loans, which is 43.5% of all Gen Z adults overall. Once inflation is accounted for, current Gen Z student loan debts would stand 13% higher than those of millennials owed at the same age.

Another driving factor of peniaphobia amongst Gen Zers is rapidly increasing housing costs.  Roughly 70% (7 out of 10) of Gen Z and millennial renters report struggling to make rent each month, driving up their fear of financial ruin. The cost of housing, particularly in the U.S., has risen significantly faster than wages. This inequality and further economic pressure from unexpected expenditure (hospital emergencies or car issues) make stable housing practically unattainable for Gen Zers. About 63% of Gen Zers report struggling to afford groceries, while 74% believe that they are one minor emergency away from certain financial ruin.

Social Media Amplifies Financial Inadequacy

On top of current economic conditions, social media amplifies financial anxiety in Gen Zers through constant comparison. Platforms like Instagram, TikTok, and Snapchat expose young people to curated and distorted views and perceptions of what financial success is. Gen Zers are constantly bombarded with unrealistic standards of success, from luxurious vacations to expensive fashion, which leads to Gen Zers developing feelings of inadequacy and incompetence.

A TD Bank survey involving more than 500 Gen Z Canadians (aged 18-28) revealed that 53% of the 500 questioned felt compelled to portray a successful image on social media platforms. 65% of the Gen Zers believed they were being left behind financially compared to their peers, while 66% felt financial pressure to hit financial goals such as purchasing a house by a particular age.

Social media also negatively impacts the younger generations’ buying habits. 40% of Gen Z regularly take on debt for impulsive purchases of items or experiences they saw on social media. 67% percent of Gen Z admit to going into debt due to FOMO (fear of missing out). 57% have made financial decisions based on social media content, and 73% say it has changed how they spend or save.

The pressure to document every moment and experience on social media has created what researchers call the “FOMO economy.” Gen Zers feel they must share all aspects of their daily lives to present this “perfect”, fulfilling life to other users and their peers. They will share their breakfasts, lunches, dinners, side hustles, weekend plans, vacations, friends, and partners to paint an image of success.

The Hustle Culture Trap

Gen Z has begun embracing the side hustle culture in response to their financial and job insecurities. Side hustles or gigs were initially meant to help supplement your primary income, acquire savings, or pay off debts. However, Gen Z is taking up side gigs as a secondary job to resolve their financial crisis, which presents new problems to an already unstable economic environment.

According to the Ernst & Young LLP (EY US) 2023 Gen Z Segmentation Study, Gen Zers growing money concerns and significant distrust of big corporations have fuelled their anxieties to an all-time high. 65% of Gen Zers reported working part-time or full-time jobs last year, while 56% earned money from freelance or side hustle work. 39% worked both a regular job and a side hustle simultaneously. This juggling act stems from pragmatic necessity rather than entrepreneurial ambition. Gen Z normalizes working multiple jobs to hedge against an uncertain future.

The mental health consequences of this hustle culture are severe. 67% of those working side hustles report feeling burned out, with Gen Z experiencing the highest rates at 73%. 41% say their side hustle impacts sleep, while 33% report it has wrecked their mental health and mood. Twenty-two percent admit that side hustle work strains their relationships.

The irony is that working multiple jobs often fails to provide the financial security Gen Z seeks. Many remain living paycheck to paycheck despite exhausting themselves through constant work. Meanwhile, the time and energy consumed by side hustles prevent investment in other aspects of well-being that might provide genuine security and satisfaction.

Mental Health Consequences Create a Vicious Cycle

Research shows that approximately 5.8 million young adults in the United States report being under significant financial distress, an alarming 17% of this population. This subsequently has had devastating psychological impacts on Gen Zers, with 56% of young adults identifying financial stressors negatively impacting their mental health. This stress then manifests as anxiety, depression, mood swings, trouble sleeping, constant overthinking about spending, comparing oneself to others who have more money, relationship problems, social withdrawal, and even suicidal thoughts.

Mental illness affects financial situations through reduced productivity, loss of employment, and increased health expenditure. People living in poverty face heightened stress, social exclusion, decreased social capital, and increased violence and trauma that lead to common mental disorders. Young adulthood is a particularly vulnerable period, as individuals transition from education to employment while relationships and social support shape their identity.

This vicious cycle perpetuates itself because financial stress drives behaviors that worsen financial situations. People may avoid looking at bank statements, make impulsive purchases to cope with anxiety, or become paralyzed by fear and fail to take necessary financial actions. These avoidance behaviors then create additional financial problems that fuel more stress.

When Money Becomes Identity

Gen Zers increasingly equate their value as human beings with their bank account balances, creating psychological damage beyond just monetary concerns. Research on Financial Contingency of Self-Worth shows that basing self-worth on financial success predicts more financial social comparisons, financial hassles, stress, anxiety, and less autonomy. When people’s self-esteem depends on financial achievement, they experience less autonomy, perceive financial problems more negatively, and disengage from financial challenges when threatened.

This identity crisis manifests through constant comparison. 69% rate their current financial situation as only “fair” or worse, with 32% rating their finances as poor or very poor. These self-assessments often reflect social comparison rather than objective financial status. Young people measure themselves against curated social media presentations rather than realistic benchmarks.

The psychological weight of tying identity to finances creates shame that prevents people from seeking help or discussing money problems. Many avoid conversations about financial struggles even with close friends, creating isolation that makes stress worse. Dating becomes fraught with anxiety about affording activities or appearing financially unsuccessful. Friend groups revolve around expensive activities that create pressure to spend beyond means or risk social exclusion.

This conflation of money and self-worth means financial setbacks feel like personal failures rather than common economic challenges. Young adults who lose jobs or cannot pay bills experience not just practical stress but existential crises about their value as people. Breaking this connection requires deliberate effort to separate financial circumstances from personal worth.

Evidence-Based Solutions: Cognitive Behavioral Therapy

Mental health professionals have developed effective interventions for financial anxiety that address both practical money management and underlying psychological patterns. Cognitive Behavioral Therapy stands as the most powerful tool for tackling financial stress.

CBT works by identifying automatic negative thoughts that appear whenever people think about finances. Thoughts like “I’ll never get out of debt” or “I’m terrible with money” fuel anxiety rather than solving problems. Instead of letting these thoughts control behavior, CBT helps examine them objectively and replace them with balanced perspectives.

Key CBT techniques for financial anxiety include thought records, which document anxious money thoughts and challenge their accuracy. Worry time involves setting aside a dedicated 20-to 30-minute period each day to focus on financial concerns rather than letting them hijack entire days. Exposure exercises gradually help people face feared financial activities like checking account balances or opening bills. Behavioral experiments test money beliefs through real-world actions, collecting evidence that challenges unhelpful assumptions.

The magic of CBT lies in breaking connections between negative thoughts, emotions, and behaviors that keep people trapped in financial anxiety. This process often reveals core beliefs about money formed during childhood, providing insights that transform relationships with finances. Unlike some therapeutic approaches, CBT offers concrete, practical strategies people can use immediately to reduce anxiety.

Research demonstrates CBT’s effectiveness for financial stress. An online CBT intervention called “Space from Money Worries” showed improvements in mental health, perceived financial well-being, and a reduced relationship between financial difficulties and poor mental health. The intervention addressed psychological mechanisms underlying relationships between poor mental health and financial difficulties.