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How Money Worries Can Scramble Your Thinking

Worrying about finances can tax the brain just as much as staying up all night.
Illustration by Katherine Streeter for NPR
Worrying about finances can tax the brain just as much as staying up all night.

There's no question that dealing with mortgages, car payments and other bills takes up time and energy. But having a tight budget may also zap our ability to think clearly, scientists report Thursday in the journal Science.

In a series of clever experiments involving farmers in India and shoppers in New Jersey, scientists found that people are worse at solving puzzles — similar to those on the IQ test — when they're first reminded of money problems.

"Financial constraints capture a lot of your attention," says Eldar Shafir, a psychologist at Princeton University, who helped lead the study. "Then there's less bandwidth left to solve problems. Your cognitive ability starts to slow down, just like a computer."

And the effect is big. After a quick reminder about money issues, people's performance on the puzzles drops down by at least a quarter — or approximately the same mental hit a person takes after staying up all night.

In the study, Shafir and his colleagues approached people at a shopping mall in Lawrenceville, N.J., and asked them how much money they earn. "We had a pretty good selection of middle-to-low income Americans," Shafir tells Shots. The lowest salaries were about $20,000 and the average was about $70,000.

Before the participants started the puzzles, they answered a question about money: "A person's car breaks down, and they need X dollars to fix it. Tell me what are the options they have available?"

People with lower incomes did just as well on the tests as those with higher salaries when the amount of money required to fix the car was low, like $100. But when the scientists raised the amount to $1,500, the less affluent participants performed worse on the puzzles.

"The money question tickles that part of the brain that has to do with your own finances," says Sendhil Mullainathan, an economist at Harvard University who also led the study. "Then you start thinking, 'Gee, how I am going to pay rent this month?' " And that interferes with your ability to think through a problem, he says.

The team found a similar trend with farmers in southern India, who get paid only once per year. Right before the sugarcane harvest, the farmers are financially strained. Immediately afterward, they're flush again. It turns out that just before harvest, the farmers performed worse on the IQ puzzles than they did after receiving their money.

"If you just look on paper at their income, these people [in New Jersey and India] aren't in poverty," Mullainathan says. "But they're financially stretched. The mechanism that we're looking at is more about being financially stretched than in poverty."

About half of Americans fall into this category, Mullainathan says. People are worried each month about getting all the bills paid.

Just realizing the effect exists could help people to counter it, he says. "If you're making a decision that actually requires you to sit down and think, you should probably wait until your mind isn't taxed by financial problems," he says.

Mullainathan and Safir say the study's findings could have broader implications. "There's an ongoing, heavy debate about why it's difficult for the poor to get out of poverty," Safir says. "We're giving a new perspective to that question."

In many instances, it's not that the poor aren't as smart or capable of planning compared as richer people, he says. Rather, being poor takes up more mental capacity. "When the poor focus on something, they manage their dollar better than the rich do, " Shafir says. "But while they're doing that very well, they have less attention to focus on other things."

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Michaeleen Doucleff, PhD, is a correspondent for NPR's Science Desk. For nearly a decade, she has been reporting for the radio and the web for NPR's global health outlet, Goats and Soda. Doucleff focuses on disease outbreaks, cross-cultural parenting, and women and children's health.
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