Understanding the ADHD Tax: The Unseen Cost of Executive Dysfunction

Let’s start with a story.

Not long ago, we received a call from a caregiver, Susan, who vividly remembers the day a few weeks earlier when her son, Michael, called her in a panic.

At 23, Michael, who was diagnosed with ADHD in elementary school, had been determined to manage his own finances after college. But as he spoke, his voice trembling with frustration and embarrassment, it was clear things hadn’t gone as planned. He had missed several credit card payments in a row—not because he couldn’t afford them, but because he simply forgot. The late fees were piling up, and to make matters worse, his credit score had taken a hit.

Then, there was the issue of his impulsive spending. Just weeks prior, Michael had walked into a tech store to pick up a new charger and walked out with a high-end laptop he hadn’t planned to buy. The instant gratification felt exhilarating at the moment, but the weight of the unnecessary debt soon followed.

As Susan shared her son’s struggles, she (and many of our other coaching clients at LSA) realized that the financial ramifications of ADHD—often underestimated—were all too real.

Michael and Susan were experiencing what we now call the ADHD Tax.

Click here to jump to the TL;DR summary.

What is the ADHD Tax?

The term “ADHD tax” isn’t an official financial term, but it’s used colloquially in the neurodivergence community to describe the various ways that individuals with ADHD and other forms of neurodivergence might face additional costs or financial penalties as a result of executive functioning challenges.

It’s easiest to understand the ADHD Tax by illustrating some examples:

1. Impulse Buying: Many individuals with ADHD struggle with impulse control, leading to spontaneous and often unnecessary purchases, which can accumulate significant costs over time. These impulsive purchases can range from small, everyday items to large, expensive purchases, leading to significant financial strain over time. Whether it’s indulging in unnecessary gadgets, and clothes, or dining out excessively, the cumulative cost of these impulse purchases can contribute to the ADHD tax.
2. Late Fees: Attention to detail or poor time management can result in missed payments for bills, subscriptions, or loans, leading to late fees and added interest charges. Despite having the financial means to cover expenses, neurodivergent individuals may struggle to remember due dates or prioritize bill payments among competing demands. As a result, late fees become a recurring expense, draining financial resources and further exacerbating the cycle of financial instability.
3. Replacing Lost Items: Forgetfulness and disorganization often mean that items like keys, phones, or wallets are misplaced and need to be replaced more frequently than usual, resulting in unexpected expenses and added financial strain. Whether it’s replacing a lost smartphone, reissuing a lost driver’s license, or investing in a new set of keys, the costs of these replacements can quickly add up, contributing to the financial challenges faced by individuals with ADHD.
4. Unused Subscriptions or Memberships: Similar to the expense of replacing lost items and paying late fees, forgetting to cancel services or memberships that are no longer needed or used can result in ongoing, unnoticed expenses.
5. Educational or Employment Penalties: In educational settings, late or incomplete assignments can lead to lower grades, which might affect scholarships and job opportunities. In work settings, challenges with time management or task initiation can prevent individuals from receiving promotions and wage increases at the same rates as their peers.
6. Emergency Purchases: Poor planning and neglecting necessary maintenance can result in situations where last-minute or emergency purchases become necessary, often at a higher cost. Whether it’s a sudden need for a new appliance, car repairs, or unexpected medical expenses, these emergency purchases often come with a higher price tag due to the urgency and lack of time for comparison shopping or finding deals.
7. Difficulty with Financial Planning: Along with the challenges above, individuals with ADHD may have difficulties in planning and prioritizing financial tasks. Your neurodivergent young adult may struggle to create and stick to budgets, prioritize financial goals, or have low motivation to plan for long-term expenses such as retirement or major purchases.

Understanding the ADHD tax is crucial for parents and educators of individuals with ADHD, as it offers a framework for recognizing and addressing the behaviors and executive functioning skills that can undermine a learner’s success and independence. For a deeper discussion on the origins of the ADHD Tax, check out this podcast from ADDtiude Magazine.

This knowledge empowers caregivers to implement strategies and systems that can mitigate these costly

Let’s now explore some of the common challenges listed above, how they relate to executive functioning, and strategies you can use to help foster better financial stability for your child.

Executive Functioning and the ADHD Tax

It doesn’t take long from reading the list of common culprits of the ADHD tax to see the connections between these financial challenges and executive functioning skills like planning, organization and time management. While there’s no scientific research that details the causal reason individuals like Michael incur the ADHD tax, we suspect that challenges with EF skills are a significant variable.

The Executive Functioning Ripple Effect

The ADHD tax closely interplays with the Executive Functioning Ripple Effect, or the idea that when learners struggle with executive functioning skills, it can cause a cascading impact on other parts of life.

Executive functioning skills, in many ways, serve as prerequisite behaviors to help our learners accomplish more complex goals. Miss those, and we see learners inevitably struggle. Repeated challenges then lead to decreases in motivation, confidence, and financial well-being. Just as in the case of Michael, repeated struggles in these areas may then result in elevated symptoms of depression and anxiety. What starts as a tiny disruption in the pond can, over time, cause a ripple effect in other areas of independence and achievement.

Strategies to Help Manage the ADHD Tax

Thankfully, there are some simple and actionable strategies that can help young adults mitigate and manage the ADHD Tax, in part by spending time boosting executive functioning skills. For your learner who may be struggling with financial decisions and financial independence, here are some easy (and affordable) ways to set the stage for better financial health.

• Establish Regular Financial Check-Ins: First, it’s best to let your learner know that understanding and minimizing the ADHD Tax is a priority for you and your time. Schedule regular check-in sessions to evaluate where things are at, review progress, identify any challenges, and provide guidance and support as needed. Regular financial check-ins are opportunities to celebrate achievements and brainstorm strategies for overcoming obstacles together.
• Evaluate & Assess the Challenges: Use your first several check-ins to work with your child to get a grasp on the challenges. Is it late fees because of forgetfulness? Are there challenges keeping track of accounts or purchases? Are there challenges with impulse control and impulse buying? Can you assess which executive functioning skills might need a boost? Understanding the scope of the current problem (and then the underlying executive functioning challenges) is the only way you’ll be able to chart a different course with your child. Keep these conversations positive, short, and growth-minded. Chances are your child is already facing extra guilt and anxiety about finances without you adding extra fuel to the fire.
• Implement SMART Goal Planning Together: After you have an idea of the current challenges, use your next check in sessions as an opportunity to help your child dive into what they want to accomplish and why it’s important to them to get on a path to better financial health. Collaborate to set SMART financial goals that are Specific, Measurable, Achievable, Relevant, and Time-bound. Break down larger goals into smaller, manageable steps and create a timeline for achieving them.

For a complete guide to setting SMART Goals, check out our exercise from The Real-Life Executive Functioning Workbook on setting goals.

• Develop a Collaborative Financial Tracking System: Work together with the individual to create a budgeting system that takes into account their needs, preferences, and financial goals. Utilize visual aids or specialized budgeting apps to make the process more accessible and engaging. This process will take time and may require some trial-and-error, so commit to spending at least six months to develop and refine the system.
• Get Educated: There are thousands of websites, books, blogs, and podcasts about maintaining good financial health. Use these avenues to help your child connect with resources that can support their success. LSA is one place to come for resources on neurodivergent personal finance. Check out these other articles and resources:
  • Teaching Unique Learners About Saving For Long-Term Purchases
  • Using SMART Goals To Improve Financial Literacy In Unique Learners
  • 14 Awesome Budgeting Apps For Diverse Learners
  • How To Teach Unique Learners About Investing
  • Teaching Diverse Learners About “Smart Shopping”
• Facilitate Automation: In as many situations as possible when developing the system, assist the individual in setting up automatic options to manage finances. Set up automatic bill payments to ensure timely payments and avoid late fees. Use direct deposit and automated savings/investment withdrawals to help them stay on track with their financial goals. Additionally, consider using an AI calendaring tool like Motion to automatically plan and schedule your financial obligations and deadlines based on the specific rules you set.
• Promote Financial Self-Advocacy & Resiliency: Empower your child to advocate for themselves in financial matters, such as negotiating fees or asking for accommodations when needed. Provide opportunities for them to practice assertiveness and self-expression for what and how they want to spend money in a supportive environment. When mistakes happen, foster a resilient mindset by emphasizing the importance of learning from mistakes, persevering in the face of challenges, and celebrating progress, no matter how small. We all make poor financial decisions from time to time, so helping your child bounce back quickly without getting off their overall plan will help set the stage for success long-term.
• Seek Professional Financial Guidance: If you as a caregiver struggle with financial decisions, connect your child with a financial advisor who has experience working with individuals with ADHD. Offer assistance in finding a qualified professional who can provide personalized advice and support tailored to their unique needs. If your child needs additional support for executive functioning skills, seek out a qualified executive functioning coach, who can help you and/or your child develop systems and tools to stay ahead of the ADHD Tax.

Most importantly, get started.

Now is the time to take action to help your child mitigate and manage the impacts of the ADHD tax.

Schedule those regular financial check-ins with your child or student, and dive into understanding their challenges and aspirations. Together, set goals and celebrate progress along the way. By taking proactive steps today, we can pave the way for a more secure and prosperous future for our neurodivergent teens and young adults.

TL;DR – (Too Long, Didn’t Read)

In navigating the challenges posed by the ADHD Tax, caregivers and educators play a vital role in supporting individuals with ADHD in building financial independence and stability.

By understanding the interconnectedness of executive functioning challenges and financial struggles, we can implement targeted strategies to mitigate the impact of the ADHD Tax. These strategies can include:

• Regular financial check-ins,
• collaborative goal setting,
• the development of personalized financial tracking systems
• fostering self-advocacy and resilience
• and seeking professional guidance when needed.

These simple actions can help individuals with ADHD navigate the complexities of financial management and pave the way for a more secure financial future.

Further Reading

• ADDitude Magazine – Podcast #419 The ADHD Tax
• Motion – Plan your work, automatically based on your tasks and priorities. SERIOUSLY takes the executive functioning sting out of calendaring.
• Life Skills Advocate – The EF Ripple Effect
• Life Skills Advocate – Executive Functioning Assessment
• Life Skills Advocate – The Real-Life Executive Functioning Workbook
• Life Skills Advocate – Teaching Unique Learners About Saving For Long-Term Purchases
• Life Skills Advocate – Using SMART Goals To Improve Financial Literacy In Unique Learners
• Life Skills Advocate – 14 Awesome Budgeting Apps For Diverse Learners
• Life Skills Advocate – How To Teach Unique Learners About Investing
• Life Skills Advocate – Teaching Diverse Learners About “Smart Shopping”