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Poor Choices: Financial Worries Can Impair One’s Ability to Make Sound Decisions

New research suggests causative link between income level and cognitive function



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Day care drop-offs and work deadlines may combine with financial woes to put a literal strain on your ability to think.

New work by a team of psychologists and economists supports the notion that humans have limited bandwidth for decision-making. And the capacity to make choices can take a hit once that cognitive load becomes too heavy. The research, based on experimental data collected on people with varying levels of self-reported income in rural India and a New Jersey shopping mall, concludes simply that at least short-term financial stress can max out our mental reserves on par with the level of impairment that results from pulling an all-nighter.

These results are “very convincing,” says Bruce McEwen, a neuroscientist specializing in stress studies at The Rockefeller University in New York City, not involved with the work. The findings are detailed in the August 30 issue of Science.

The researchers took their hypothesis on finite brainpower to a mall in New Jersey, where they asked several hundred people to participate in questioning designed to sometimes remind them of their own finances while considering hypothetical budgetary decisions. Respondents were then asked to perform standardized tasks that measured logical thinking and cognitive control, such as choosing which shapes fit into a missing sequence and their ability to click in certain parts of a screen after seeing certain figures. Subjects who were less well off in real life (as defined by household income) performed worse than those who reported higher real-life incomes. The researchers also took into account several variables, such as math anxiety and low incentives for correct answers, to establish a causal link between household income and cognitive performance.

Notably, when low-income and more affluent individuals were asked to make easier financial decisions in an exercise about smaller sums of money—meant to reproduce conditions in which participants would be less likely to think of their own financial hardships—both groups performed at similar rates on the cognitive tests. Household income among the sampled population ranged from a median of about $70,000 to as low as $20,000 adjusted by family size, roughly approximating a cross-section of the U.S.

The authors also wanted to test their hypothesis on people dealing with their real-world budget decisions before performing cognitive tests. So they studied sugarcane farmers living in India before and after harvest time, gauging how resulting swings in income had an impact on subjects’ ability to solve standardized psychological problems similar to those posed to the New Jersey subjects. As with the U.S. results, higher household incomes were tied to better performance on the cognitive tests. Following the harvest, when the farmers’ finances were more assured, these same individuals performed better than before the harvest at cognitive tasks. Better performance did not result from familiarity with the cognitive tests though—to dismiss that possibility, the researchers ran the experiment separately on farmers who did not participate in the preharvest experiments and came up with similar findings.

The Indian farmers’ better scores when they had more cash could not be explained away by season (harvest times varied across the sample) nor by changes in physical exhaustion (the farmers were typically managerial and did not perform physical labor). No significant nutritional differences were observed among subjects preharvest and postharvest either. Periods of stress during harvest time, as measured through heart rates and blood pressure in separate work, also could not account for the changes.

So what’s at the root of the income–brain work problem? The scientists suggest that it is a matter of “attentional capture,” meaning that poverty triggers intrusive thoughts that draw on the brain’s limited reserves. That distraction goes beyond the myriad, random thoughts that can pop up in our daily lives, says study author Eldar Shafir, a behavioral scientist at Princeton University. “If I am driving and someone is riding past on a unicycle, I get distracted, and then I’m back in a few moments,” he says. “Here it is ‘capture’—I spend an enormous amount of time on [financial concerns] and I keep coming back.” Shafir and one of his co-authors has a forthcoming book on the topic.

Alternative issues that demand attention, such as calorie counting in a diet, also could reduce cognitive abilities. The difference with money, however, is that one can end a diet anytime; not so with financial stress, Shafir says.

“What’s nice about these studies is we showed the low-income people do exactly as well as high-income people when they aren’t worried about their finances,” he says. “This is a clear way of showing it’s not about being a poor person. It’s about being in a moment of poverty.”

The study is not the last word on the sociology of poverty. The authors did not tackle questions about the impacts of being poor throughout a lifetime nor possible physical or chemical changes in the brain from long-term stress. “This is a major study, and these findings have significant impacts for policy,” McEwen says. “This is a good way of thinking about helping people.” Still, he cautioned, chronic stress may be playing a larger role than addressed in this research because it can surface in subtle ways that affect the brain but would not show up in the biomarkers measured in this study.

These new results also support other research on an overlapping area of study—an emerging field called self-control, says Kathleen Vohs, a consumer behavior expert at the University of Minnesota who published an accompanying commentary piece on the findings in the same issue of Science.* Self-control studies look at the finite ability of individuals to overcome urges and make decisions. They posit, in a similar vein, that when individuals are faced with many decisions that demand trade-offs—such as a scarcity of food, time or money—and do not have a chance to recover from the resulting brain drain, self-control can tank. That depletion, in turn, could lead to decision-making patterns that impede one’s ability to improve their lot in life, she says. “Because the poor must overcome more urges and make difficult decisions more often than others, they are more likely to overeat, overspend and enact other problematic behaviors,” she wrote.

This work should be translated into policy action, the authors wrote. When cognitive load is high and money is short, educational service offers are ill-timed, for example. Freeing up more brain bandwidth by shortening forms needed to apply for a job or assistance, for instance, could also help in adapting to personal financial stress.

*Editor’s Note: Vohs is the author of a forthcoming article in Scientific American.

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