Sunday 2 December 2018

Do poor people make poorer financial decisions?

A few days ago, this article came out which roughly summaries on why poor people tend to make not so smart choices due to tunnel vision or that you need to make short-term decisions rather than to plan for the long term.

I do know that poverty can strip a lot of opportunities and chances for an individual but I never knew that it can affect the cognitive aspect of the individual as mentioned in the article:
"Research from Princeton University has claimed that the dip in cognitive function in a person preoccupied with money problems is similar to a 13-point drop in IQ."
The main thing is that because the individual is so preoccupied with their expenses and financial status that the brain is worn out.

One example mentioned in the video was that of Mdm Mary Yeo, who spend almost all her financial assistance buying $400 worth of packet drinks because her children always walked past the provision store.

I do on a certain degree can understand what she is feeling, because she finally could have th capacity to fulfill her children's wants. Needs and wants are easily mixed up to a person and to successfully differentiate between you wants and needs are not easy.

Also, the habit of saving might not be embedded in their lifestyle and therefore with an excess of cash, they were not sure what to do when an amount of cash is given to them.

Definitely, I feel that there is a difference in decision making between the rich and the poor. As the phrase goes, "The rich get richer and the poor get poorer".

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