Why More & More Seniors Are Keeping Up with Money Matters
New research suggests that decades of experience in managing finances helps seniors stay wise about money matters, despite the mental declines that come with age.
There are various ways the brain handles money matters, explained study lead author Ye Li, an assistant professor of management and marketing at the University of California, Riverside.
“Two different types of intelligence provide separate pathways to good financial decisions,” he said. “One relies on ‘active thinking’ that declines with age, and one relies on expertise and knowledge that improves with age.”
It's normal for different elements of brainpower to decline with advancing age, added clinical neuropsychologist Daniel Marson, director of the Alzheimer's Disease Center at the University of Alabama at Birmingham. Marson, who was not involved in the new study, said that short-term memory, thinking speed and "the ability to manipulate multiple sources of information," also known as mental "multitasking," can all falter with age.
It’s clear that seniors are also often the victim of financial scams. One 2011 study in the Journal of General Internal Medicine found that one in 20 people aged 60 or over in New York state said they’d been financially exploited within the past year - usually by a family member.
So just how well does the average senior deal with financial matters? To find out, Li’s team examined the results of survey questions an tests given to almost 500 US residents aged 18-86. The tests contained questions designed to analyze financial acumen in areas such as health insurance and credit card use. The researchers also analyzed credit scores they’d obtained from many of the participants.
Older people in the study typically had higher credit scores than younger people, Li's team found. The reason? Seniors tended to have financial knowledge that made a real difference, even though other brain skills may have declined with aging.
"Older people are still good at making decisions that they've made many times before and have developed sufficient expertise with," Li explained. "However, they may run into trouble when it comes to new and complex decisions that they have less experience with," he added. "For example, choosing a new health care plan after retirement or planning how to make retirement savings last the rest of their life are extremely difficult decisions with a lot of variables that will tax older decision makers.”
Li added that the study results suggested younger people could stand to learn more about managing money - perhaps even from their grandparents.