It was therefore concluded that better financial management abilities as a component of financial literacy result in a behavioral, rather than cognitive, benefit in helping individuals to cultivate a habit of borrowing less and avoiding high interest rates, thus decreasing overall debt.
This is also associated with cognitive load, and potentially with ego-depletion. To summarize, research has shown that poverty impacts executive functions directly, and indirectly via cognitive load in the form of negative affect and stress.
This led to the discovery that wealth inequality is largely caused by deficiencies in financial management. Concentrated collective poverty In many industrialized, relatively affluent countries, particular demographic groups are vulnerable to long-term poverty.
A persistent regulation of basic needs can thus lead to reduced self-control Hofmann et al.
However, other studies Cornelisse et al. These findings allow us to propose a complex conceptual model, which reflects the consequences of poverty on economic decision-making via a cognitive mechanism that rationalizes these relationships.
Frederick found that individuals with more deliberative reasoning higher cognitive reflectionwere more inclined to risk-taking, especially when the potential reward was high.
Therefore, investment should be made in different sectors like clean drinking water, education, health, and sanitation for reducing poverty.
They claim that the preference of a smaller immediate reward is due scarcity of resources faced by poor people, who are often at risk and have reduced self-control and display impulsive behavior.
People can fulfill their basic needs but not as much as other rich people.
Their livestock numbers have continued to deplete primarily due to the need to sell or exchange animals usually sheep for necessary items, such as flour, rice, clothing, cash, etc.