Poverty doesn't itself reduce IQ—but research suggests that active financial worries can impair thinking.

People who regularly face financial hardship are especially sensitive to money-related stress.

Field studies find that cognitive performance drops during periods of financial scarcity.

Timing your decisions to avoid peak financial worry can meaningfully improve the choices you make.

In a famous research article, Mani et al. (2013) concluded that those who struggle with financial problems "are less capable not because of inherent traits, but because the very context of poverty imposes load and impedes cognitive capacity." This article is often taken to imply that financial stress reduces IQ—but that is not quite correct.

How do financial worries impair your cognitive functions? And how much should we worry about whether we worry?

Financial Worries and Your Brain

In their paper, Mani et al. examined the cognitive performance of New Jersey shopping-mall visitors while financial concerns were on their minds. First, participants were asked to think about some hypothetical decisions, like this one:

"Your car is having some trouble and requires $1,500 to be fixed. You can pay in full, take a loan, or take a chance and forego the service for now. How would you go about making this decision?"

"Your car is having some trouble and requires $1,500 to be fixed. You can pay in full, take a loan, or take a chance and forego the service for now. How would you go about making this decision?"

While thinking about these decisions, participants completed two tasks used to measure cognitive capacity: Raven's progressive matrices, which are........

© Psychology Today