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Nation/World

August 30, 2013

Financial stress may impair your thinking

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.

So, being late on loans could end up costing you both interest points and IQ points, Mullainathan said.

The study used tests that studied various aspects of thinking including a traditional IQ test, getting the 13 IQ point drop, said study co-author Jiaying Zhao, a professor of psychology and sustainability at the University of British Columbia.

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.

Then they looked at real life in the fields of India, where farmers only get paid once a year. Before the harvest, they take out loans and pawn goods. After they sell their harvest, they are flush with cash.

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