Editorial Policy

Study: Being poor hijacks your brain

Kristin McGrath

September 12, 2013

Think about how well you function after a night of no sleep. Chances are, your day will be filled with slip-ups, forgotten tasks and an inability to concentrate on more than one thing at a time.

Being poor, new research from Princeton University has found, affects you the same way.

The paper, “Poverty impedes cognitive function,” was published Aug. 30, in the journal Science. Researchers studied people at a mall in New Jersey and on sugarcane farms in India and detected the same phenomenon — the less someone earned, the worse they perform on cognitive tests when faced with financial problems.

Here’s how the experiments worked: Subjects with a variety of salaries were given various “financial problem” scenarios to ponder. Some problems were more difficult (a major car repair or health emergency), while some were easier (a small, unexpected expense). After receiving their scenario, participants were given intelligence and cognition tests.

When the stakes were low and the financial scenarios easy, those who earned a lot of money and those who earned very little performed equally well on the intelligence and cognition tests.

When the financial scenarios were difficult, however, a gap appeared between the rich and poor participants. Wealthier participants had no difficulty with the cognitive tests, while the poorer ones struggled. Based on results, poorer participants experienced a 13-point drop in IQ — the equivalent of a night without sleep.

That’s because of the brain’s hardwired crisis-response reaction to scarcity. Scarcity hijacks our cognition, diverting all mental capacities to it. As a result, when we don’t have enough of something, whether it’s time or money, that scarcity, as the study’s authors describe it, consumes “mental bandwidth,” leaving nothing left over for other responsibilities.

This is not the same as stress, the authors emphasize. Stress can actually help us perform better under pressure and juggle multiple tasks. Just think about the focus that floods your brain during a particularly stressful situation. Our reaction to scarcity is much more malicious, as it renders us incapable of handling the things we usually find easy.

In a blog for The Billfold, Isa Hopkins, describes the mental take-over of poverty like so:

“Being poor means that every day involves sorting out a new catastrophe: late buses and food stamps reporting and overdraft fees and fixing everything yourself, because who the hell can afford a replacement? It’s a strange combination of dependence and insular self-reliance, this condition known as poverty, and for those of us inside of it, sometimes putting one foot in front of the other is all we can muster.”

So what does that all mean for personal finance? Well, if your brain is consumed by scarcity, it’s not reminding you to pay bills and make your weekly work deadlines. That can lead to late fees (which exacerbate the scarcity problem) or a loss of income (ditto).

With your mind so overcome by poverty, forget being able to perform the complicated tasks that could get you out of your situation. If participants struggled with intelligence and cognition tests during the study, how well can they be expected to perform the complicated dance of securing government assistance? Or handle the complicated maneuvers necessary to pay off debt, handle bill collectors and repair credit damage? Suddenly, payday lenders offering a quick and easy way out might seem like a good idea.

Based on their results, the study’s authors concluded that many of the things we blame poverty on (personal failings, lack of education and unsafe living situations) aren’t the root of the problem. Poverty itself fuels poverty, and our own brains perpetuate the cycle. And that means there’s no easy way out.

The personal finance blogosphere also has a lot to say about being poor, as many have experienced it firsthand. Here are several of their unique takes:

The Frugal Girl responds to Internet commenters who think they have it all figured out when it comes to escaping poverty.

Sandy of Yes, I am Cheap recounts immigrating to the United States as a child and, with very few resources, building a life she’s proud of.

The Simple Dollar argues that there’s a difference between being poor and being broke.

Our Freaking Budget wonders if frugality can sometimes be perceived as being poor.

Len Penzo points out that the health problems, life upheavals and bank fees that go hand-in-hand with being poor make poverty quite expensive.