Money Struggles Hurt Cognition, Says Study


When you are dealing with budgetary finances, it does intrude on your thinking. It's at the top of your mind.

Eldar Shafir, a Princeton University psychology professor

WASHINGTON—Being short on cash may make you a bit slower in the brain, a new study suggests.

People worrying about having enough money to pay their bills tend to lose temporarily the equivalent of 13 IQ points, scientists found when they gave intelligence tests to shoppers at a New Jersey mall and farmers in India.

The idea is that financial stress monopolizes thinking, making other calculations slower and more difficult, sort of like the effects of going without sleep for a night.

And this money-and-brain crunch applies, albeit to a smaller degree, to about 100 million Americans who face financial squeezes, say the team of economists and psychologists who wrote the study published in Friday’s issue of the journal Science.

“Our paper isn’t about poverty. It’s about people struggling to make ends meet,” said Sendhil Mullainathan, a Harvard economist and study co-author. “When we think about people who are financially stressed, we think they are short on money, but the truth is they are also short on cognitive capacity.”

If you are always thinking about overdue bills, a mortgage or rent, or college loans, it takes away from your focus on other things. 

The scientists looked at the effects of finances on the brain both in the lab and in the field. In controlled lab-like conditions, they had about 400 shoppers at Quaker Bridge Mall in central New Jersey consider certain financial scenarios and tested their brain power.

“It’s a very powerful effect,” said study co-author Eldar Shafir, a Princeton University psychology professor. “When you are dealing with budgetary finances, it does intrude on your thinking. It’s at the top of your mind.”

Education differences can’t be a major factor because the poor only scored worse when they were faced with big bills, Safir said. The more educated rich may have learned to divide their attention, but that wouldn’t be a significant factor, he said.

The study’s authors and others say the results contradict long-standing conservative economic social and political theory that say it is individuals—not circumstances—that are the primary problem with poverty. In the case of India, it was the same people before and after, so it can’t be the person’s fault.

“For a long time we’ve been blaming the poor for their own failings,” Zhao said. “We’re arguing something very different.”

Poverty researcher Kathryn Edin of Harvard, who wasn’t part of the study, said the research “is a big deal that solves a critical puzzle in poverty research.”



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