Financial stress may hit your brain and wallet
By Seth Borenstein, AP, Aug 29, 2013
WASHINGTON (AP)—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. So being late on loans could end up costing you both interest points and IQ points, Mullainathan said.
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.”
She said poor people often have the same mainstream values about marriage and two-parent families as everyone else, but they don’t seem to act that way. This shows that it’s not their values but the situation that impairs their decision-making, she said.