Financial stress can see IQ drop by 13%

Data from Wagestream found that money worries have an enormous impact on a person’s ability to think clearly and is equivalent to losing 13 IQ points. 

This is especially concerning as the research found that 25 per cent of the population has £100 or less in savings and from that group, 17 per cent have no savings at all. 

Emily Trant, head of impact and inclusion at Wagestream, said: “When you’re financially stressed it can actually cost you IQ points.

"So, when you are worrying about money and thinking about how to manage incoming payments, it can consume your processing power and research suggests it is not a little bit, it’s actually quite a lot. 

“Being financially stressed costs 13 IQ points and that can take someone with average intelligence down to a category called ‘broadline deficient’.

"Or if you flip it, from average up to a category called ‘superior intelligence’. So, when people are stressed about money they are less able to make good decisions and they are less able to be productive at work and less able to control their emotions and impulses. 

“It’s a really problematic finding. Financial stress is actually worse than losing an entire night’s sleep, and anyone who has young kids will know that can really impact your very next day. So, imagine having that on repeat for day in and day out. It can be incredibly difficult to come out of that.”

The data was unveiled by Generali UK on Thursday (October 26) during a webinar entitled ‘The state of financial wellbeing in 2023’.

The idea of being financial excluded is that you don’t have access to financial productsEmily Trant, Wagestream

During the session, Trant revealed that a recent pilot scheme which automatically opted workers into saving and required them to actively opt out if they wanted to stop saving, found that savings participation jumped from 16 per cent to 71 per cent. 

Trant argued that giving workers precise data on exactly how much they earn can boost productivity.

Interestingly, the data found that people work 11 per cent more on average when they have visibility over their earned wages, while 78 per cent of people spend less on average when they have visibility over their earned wages. 

She said: “When we give people tools that enable them to clearly understand their financial circumstances, they take action and we see really powerful behavioural changes.

"When we showed people how much they were earning day by day, it enabled people to make positive decisions about what they are going to do with their money. So, for people on a shift pattern where they are paid by the hour, individuals choose to work more shifts.”

The data also found an estimated £19bn in state benefits go unclaimed each year in the UK. 

Trant said this can be attributed to lack of knowledge on how to access these benefits and this lack of knowledge can lead to financial exclusion. 

She said: “The idea of being financial excluded is that you don’t have access to financial products. In the very extreme end, this can mean not having access to a bank account and having to rely on different ways to manage money.

"There are different degrees of financial exclusion. It could mean that you do have a bank account but you don’t have any features with it - so you don’t have a savings account, or you don’t have an overdraft or you can’t get a credit card. Or it can mean that the product you can get don’t work for you. So, you have a very high APR product that’s too expensive.”

Trant said there are four things employers can do to support their colleagues gain control of their finances. 

This includes continuously communicating the positives of any work benefits available, getting the right stakeholders together to improve the financial wellbeing of workers, invest in opt-out savings programmes and look at financial wellbeing toolkits that are data driven to enable more people to take action with their money. 

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