Worrying over money is not only a drain on mental energy, but a new study suggests it feels like "pulling an all-nighter" every day, causing people to make riskier decisions which can lead them into further debt.

"Poverty is the equivalent of pulling an all-nighter," said Harvard economist Sandhil Mullainathan, one of the authors of the study which was published Thursday in the journal Science. "Picture yourself after an all-nighter. Being poor is like that every day."

The researchers surveyed random low- and middle-income shoppers in a mall in New Jersey, along with sugar cane farmers in rural India. In the mall experiment, shoppers were asked a series of questions to measure their IQ and impulse control. The shoppers were divided into two groups, the first were posed with a "teaser" question - what they would do if their car had broken down and needed $1,500 worth of repairs - intended to add extra financial stress to their decision-making process. The second group did not have to consider the extra financial burden.

Meanwhile in India, researchers tested the cognitive capacity and decision-making of farmers before the sugar cane harvest, when they were most strapped for money, and afterwards, when they had fewer financial woes.

The study found that people who are struggling financially temporarily lose 13 IQ points when they are faced with a difficult decision, making them more susceptible to bad decisions that can perpetuate their situation.

"Previous accounts of poverty have blamed the poor for their personal failings, or an environment that is not conducive to success," said lead author Jiaying Zhao, a professor from the University of British Columbia's Department of Psychology.

"We're arguing that being poor can impair cognitive functioning, which hinders individuals' ability to make good decisions and can cause further poverty."

"Our paper isn't about poverty. It's about people struggling to make ends meet," Mullainathan noted. "When we think about people who are financially stressed, we think they are short on money, but the truth is they are also short on cognitive capacity."

Researchers concluded that when people are exhausted in dealing with tasks like scrounging to pay bills, less "mental bandwidth" remains for education, training, time-management, and other steps that could help break out of the cycles of poverty.