Older adults are well aware of their financial skills – and these skills actually improve with age – that is, until dementia starts, according to new research from Binghamton University, State University of New York.
From paying bills to making change, knowing how to deal with money is needed to live and thrive in society. But what happens when we get older? Do our financial skills take and, if so, are we even aware of our own shortcomings?
To investigate this, a team of researchers, led by Binghamton University psychologist Ian McDonough, analyzed data from an existing study of 2,800 older adults collected for 10 years. Participants assessed how well they believed that they could handle different financial tasks, such as making a change, paying bills and balancing a checkbook. The researchers then asked participants to perform various financial tasks. In one test, individuals were shown a pamphlet that the price of a gym membership advertised and was asked to determine how much that membership would cost in total more than ten years.
The researchers discovered that older adults have good insight into their financial skills, and this actually improves age and experience.
We really did not know how well people would judge their financial skills and predict them. And they can predict them surprisingly well. It seems that people get better with time. So by the time you arrive in your 70s, as long as you maintain your cognition well, you can predict your financial skills a little better. It is almost as if you learn as you get more and more experience, especially when you retire, and you are dealing with social security, medicaid, medicare and all those types of things that have to do with finances. “
Ian McDonough, associate professor Psychology, Binghamton University and main author of the study
But the same does not apply to people with Alzheimer’s disease. The ability to predict the financial competence actually deteriorates with a diagnosis. People with Alzheimer’s can have few financial skills and think they are financially smart, or vice versa.
A common symptom of Alzheimer’s disease is anosognosia, in which a person does not become aware of his cognitive skills. Most research in this area has focused on anosognosion because it relates to memory, but little is known about how it relates to financial skills.
“This was one of the first studies to see if, as people get older, they are aware of their financial performance, and are they aware of when it starts to fall?” said McDonough.
McDonough emphasized the importance of early financial guarantees and education for older adults, who run the risk of not paying important accounts or falling prey to financial scams. He suggests that when individuals may think that their financial skills are starting to fall, family members and friends can collaborate with the individual to brainstorm about setting up guarantees and share bank account information, so that things are safe before a person has a total lack of consciousness.
“If you have dealt with financial tasks all your life and you will be diagnosed with Alzheimer’s disease, you may still think: ‘I can still handle it’. And maybe you want to try to force your independence, but that also makes people in danger to fraud and scammer as more protections to protect them. Unless earlier in the process.
McDonough said that future research will investigate the brain activity of older adults during mathematical tasks and their alphabetization of digital banking.
De Paper, “Relationship between observed and objective financial skills in older adults: results of the active cohort”, will be published in The gerontologist on 2 June.