When you’re poor, financial stress and anxiety about money lead to higher levels of the stress hormone cortisol. This imbalance affects your ability to make decisions. In practice, the simplest solutions can seem very complex… it’s like paying a cognitive tax for being poor, said Dr. Mirela Oprea, coach and dream manager, at the BCR Savings Conference.

The idea of ​​this mental impact of poverty was discovered by scientists who published a study 10 years ago in the journal Science, which showed that poverty puts such a mental strain on people with financial difficulties that they have little “bandwidth” left to think about how to get out. out of poverty, for example, get a different form of education, look for a new job, or rethink yourself.

A state of poverty was associated in the mentioned study with a loss of 13 IQ points

This discovery further undermines the theory that poor people are responsible for their own poverty. Being poor means, as the authors write, “dealing not only with a lack of money, but also with a lack of cognitive resources.”

This explains, for example, why poor people are not always very good parents. These two challenges are somewhat related.

Financial peace is an extremely important condition for the possibility of realizing personal aspirations

Financial peace of mind is critical to realizing personal aspirations, and it’s not easy to achieve, but it’s not impossible when we have the right information, resources, and tools, says Dr. Mirela Oprea.

According to a psychotherapist, one of the most common psychological consequences of financial worries is anxiety. People who face financial problems or uncertainty related to income, debt or expenses may develop anxiety, which manifests as rumination, panic attacks, insomnia or even a general feeling of fear or restlessness.

What else Dr. Mirela Oprea said:

• Chronic financial stress can cause feelings of helplessness, a diffuse or acute sense of failure in life, a constant state of sadness, discouragement and even depression. When we feel overwhelmed by financial problems, we can lose interest in enjoyable activities, have difficulty concentrating, and have a general sense of disgust with life.

• The need to occasionally or constantly seek financial help can affect our self-esteem, because when we face financial difficulties, we begin to doubt our abilities and competences. In the presence of financial worries, personal relationships and even professional activities may suffer.

• Financial worries can change how the brain works. Thus, financial stress and anxiety about money can lead to increased levels of cortisol, the stress hormone. This hormonal imbalance can affect cognitive functioning, decision making, and memory. Affected individuals may have difficulty concentrating, learning, and problem solving. The simplest solutions can seem very complex, like paying the cognitive costs of poverty.

• What can we do to address these negative mental health outcomes? We have another tool, financial coaching, with which a specialized person called a coach (coach in English, where the term comes from) helps a client, a person who wants to change his attitude to money, but for whom there is not enough information to set clear financial goals and achieve them step by step. Financial coaching takes place as part of a process that can include several stages: assessing the financial situation, setting goals, developing an action plan, removing obstacles, supporting motivation along the way, etc.

• For some people, unfortunately, even this is not enough, because there may be emotional wounds in the person’s history, trauma related to money and dysfunctional patterns of behavior, perhaps passed down from generation to generation, limiting beliefs that come from grandparents and ancestors, it cancels out any quality information because a healing process is required first.

• And for these people there is financial therapy, a new discipline that has emerged in the last 20 years. In financial therapy, financial therapists help clients explore and understand their emotions, thoughts and behaviors related to money, understand and heal emotional wounds related to money, and analyze beliefs and past experiences that have influenced how clients perceive money and manage it, identify and change their money disorders or unhealthy financial behaviors, manage stress, anxiety or even money-related depression.

What research presented by BCR reveals about Romanians’ relationship with money and saving behavior

• The main concern of Romanians (61%) at the moment is occurrence of an unforeseen situationd, the solution of which involves spending money that I do not have.

• Only 47% of full-time employees aged 30 to 45 manage to save. Of them, the majority (56%) do it because of caring for their loved ones, with an emphasis on family well-being and children’s education.

• Employees with children feel more vulnerable than non-parents about not having an emergency fund – only 46% of those with children manage to save, compared to 51% of those without – the most likely reason being the increased financial responsibility for growth of small units.

• Unexpected expenses, for example, from 301 to 1000 euros, more easily destabilize families with children, especially with small children aged 3 to 5 years. According to the data collected, an unexpected expense of €1,000 would affect financial stability for more than a third of respondents, and 26% would be affected by amounts of €501-1,000.

• When it comes to savings, the main goal for most respondents is to create an emergency fund (75%), wanting to control this vital aspect. On the other hand, of those who can’t save, nearly three-quarters cite the high cost of living as the main reason, with 40% saying they simply don’t have the extra funds to save regularly, even if they work full-time. , highlighting the problems of saving money. However, 58% of those who fail to save money say they would like to implement a monthly savings plan.

• “The research presents serious reasons for concern at the societal level, but at the same time it also reveals a dose of hope. We should all be concerned that so many Romanian workers cannot save for the dark days, especially in this socio-economic context. “Even more troubling is that one of the most vulnerable groups is the one that needs the most care and protection in the face of the unexpected: families with children,” said Dana Dima, vice president of retail and private banking at BCR .

Cult Market Research was commissioned by BCR between August and September 2023 on a nationally representative sample with a margin of error of ±4.3% of full-time employees aged 30 to 45 from urban and rural areas using a data collection method CAWI. The study also highlighted the fact that:

• 7 out of 10 respondents say they spent more money than they earned in the past 12 months.

• The most common contingencies that can destabilize the budget are health problems (65%), car breakdown (57%), weddings/christenings (53%), equipment breakdown (45%), vacation expenses (39%).

• 56% of men say they save, while only 41% of women say they save money.

• 48% of urban residents manage to collect money, and in villages only 38%.

• More than half of those who own a home can afford it, while about three-quarters of those who rent say they can’t.

• 66% of those who live with their unmarried partner say they save, 48% of married people save and only 42% of single people save.

• More than half of those with a college degree manage to save money (52% of those with a college degree and 56% of those with a master’s or doctoral degree), while more than two-thirds of people without a college degree say they don’t save

60 thousand Romanians have 100 times more savings than the other 14 million citizens

The financial assets of the population increased significantly, correspondingly by 8 times (by 112 billion euros). They are strongly polarized, this characteristic is demonstrated by the distribution of deposits, so that 0.4% of depositors (59,500 people) at the end of the third quarter of 2022 accumulated 26% (64.6 billion lei) of the total amount of deposits of citizens who hold an average of 1.08 million lei per person, corresponding to the equivalent of 220,000 euros.

At the opposite pole are 99.6% of depositors (14.1 million people), who own 74% of deposits, the average amount of savings of these people is 11,000 lei, which is equivalent to only 2,200 euros.

National wealth per capita increased in the period 2003-2019 to EUR 32,700, 2.9 times / The EU-27 average is EUR 102,000, which is 3.1 times higher

(Source: Vlad Ispas | Dreamstime.com)