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September 17, 2021

Being poor saps people's ability to think clearly: report

Those dealing with day-to-day financial challenges may face much more than just a shortage of cash -- their brains may be overtaxed as well.

The mental strain of living in poverty and thinking constantly about tight finances can drop a person’s IQ by as much as 13 per cent, or about the equivalent of losing a night of sleep, according to a new study.

Struggling this way consumes so much mental energy that there's often little room to think about anything else, which leaves low-income people more susceptible to poor decisions when it comes to managing money.

Previous studies have documented that poor people are less likely to take medications, keep appointments, or be attentive parents so the findings aren't a complete surprise. But the mental strain may be even stronger than many think.

"While the poor may be experiencing a scarcity of money, at some level what they may really be experiencing is a scarcity of bandwidth, of cognitive capacity,” the study's authors conclude. "It’s the situation that’s creating the stress."

The researchers looked at shoppers with average annual income of about $70,000, with the lowest income level at about $20,000. Studt participants were asked to ponder how they would solve financial problems such as a sudden car repair, being randomly assigned repair costs ranging from $150 to $1,500.

Split into "poor" and "rich" groups based on income, the study suggested that both groups performed equally well on cognitive tests when the dollar amount was low.

But, when faced with the prospect of a $1,500 car repair, those at the lower end of the income scale performed significantly worse on various intelligence and cognition tests. The more affluent participants, however, performed just as well as they had before.

"Previous views of poverty have blamed poverty on personal failings, or an environment that is not conducive to success," says lead researcher Jiaying Zhao, who now teaches at UBC. "We're arguing that the lack of financial resources itself can lead to impaired cognitive function. The very condition of not having enough can actually be a cause of poverty."

Does struggling with take such a toll? Have you had periods in your life when money worries clouded your thinking?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...