Many people lost money during The Great Depression for several reasons. The stock market crashed and the money lost in the stock market was, for the most part, imaginary money. People lost money that they believed they had, but in reality it didn't exist. Banks closed. Businesses failed. People lost their jobs. According the the University of Wisconsin, all these things contributed to an estimated 50 percent loss of income from 1929 to 1932.

Growth of the Stock Market

The stock market crash of 1929 was brought on by overselling of stocks during a period of rapid growth in the 1920s. During this time the value of stocks increased so much that people began to think that investing in stocks was the key to making more money. Many people took out loans from banks to invest in stocks.

Crash of the Stock Market

The crash of the stock market was the beginning of the loss of money during the Great Depression. In October 1929, over a period of a few days, stock trading doubled and even tripled causing panic selling. This loss of confidence caused stock prices to crash.

Stock Market Loans

The stock market crash caused such money loss that individuals who had taken out loans to buy stock could no longer repay their loans. When the banks tried to collect the money, there was no money to be collected.

Banks Close

The banks themselves had invested money in the stock market, so they lost money during the stock market crash. People's savings that they had trusted the bank with had been invested on behalf of the bank in the stock market. Panic spread and people rushed to their banks to withdraw their savings. Banks started closing without notice, and anyone who had money in the bank lost it.

Loss of Jobs and Businesses

People all over the country lost money during the Great Depression. When they started feeling the results of the stock market crash, people tried to save money and stopped buying goods. This loss of demand for goods caused businesses to close and jobs to be lost.

Source:

PBS.org: Stock Market Crash

University of Wisconsin: The Great Depression