The Cost of Counting the Cost
October 31, 2014
This is a guest post written by Kent Blake who interned with our engineering team during the summer of 2014.
Congressman Pat Schroeder once said “You can’t wring your hands and roll up your sleeves at the same time.” A 2013 study published in the journal Science indicates that poverty leads to handwringing rather than sleeve rolling. In the study, participants were divided by household income and asked to consider a hypothetical scenario about how to pay for car repairs while completing various tests of fluid intelligence.
While the rich and poor participants scored almost identically on the intelligence tests when the hypothetical repairs were relatively inexpensive ($150), the poor participants performed significantly worse than their rich counterparts when the repairs required a larger financial sacrifice ($1500). Simply requiring poor participants to contemplate a difficult hypothetical financial situation caused a drop in their cognitive function equal in magnitude to the effect of being deprived of a full night’s sleep or being a chronic alcoholic.
The takeaway? The more people worry about their finances, the less cognitive resources they are left with to manage them effectively.
At Juntos, we seek to create tools to reduce handwringing. By providing the right information in measured doses at the right time, we empower people to spend less time worrying and more time taking action. From assistance with basic tasks like depositing and withdrawing funds to savings reminders and budgeting tips, our resources enable to people stop wringing their hands and start rolling up their sleeves and working to achieve their financial goals.