Nav: Home

Older adults have 'toxic combination' of lower financial literacy, higher self-confidence

May 09, 2016

COLUMBIA, Mo. - Previous studies have shown that as humans age, cognitive declines are inevitable. Now, a recent study by researchers at the University of Missouri and Texas Tech University has confirmed that this cognitive decline extends into financial literacy. The researchers also found that older individuals retain a strong sense of self-confidence, which could add to the problem, leading to significant mistakes when making financial decisions.

"Mixing a decline of financial literacy with an increase in self-confidence is a toxic combination," said John Howe, professor and chair of the Department of Finance in the Trulaske College of Business. "This opens the door for more honest mistakes as well as fraud. It's widely known that older adults are very common victims of financial fraud. It's important that as we age, we find someone who has our best interests in mind when managing our finances."

In the study, Howe and his colleagues, Michael Finke and Sandra Huston from Texas Tech University, surveyed more than 3,850 individuals 60 and older and found that they experienced increasing declines in financial literacy, which is the ability to understand and make good decisions about personal finances. The researchers also found that the participants' self-confidence increased slightly. This meant that even though they didn't understand financial terms or policies well, they still believed they could make good decisions about their personal finances.

Howe recommends finding a financial adviser who has a good reputation; however, hiring the first adviser mentioned is also not a good idea. Howe says that investors should talk with family and friends and look for advisers who have good records and are willing to take the time to answer all of your questions.

"It is important to find an adviser who has your best interests at heart," Howe said. "Be sure to understand how your adviser is paid--fees, commissions, and so forth -- as that can affect their perspective. Investors should expect to pay for good financial advice; it will save them thousands of dollars in the long run."

Howe said it's tough to know when the cognitive declines will begin, so it's a good idea to make a financial checkup a part of an annual doctor visit. During the medical visit, Howe recommends asking the doctor about any signs of cognitive declines. Following the doctor's visit, it's a good time to check in with a financial adviser and make sure every financial decision being made is clear, Howe said.

The study, "Old Age and the Decline in Financial Literacy," is available online and will be published in an upcoming issue of Management Science.
-end-
Editor's Note: Click here to answer some of the questions the researchers asked participants during the study: https://missouri.qualtrics.com/SE/?SID=SV_efmvyNNlANLTSVT

University of Missouri-Columbia

Related Cognitive Decline Articles:

More amyloid in the brain, more cognitive decline
A new study from the Center for Vital Longevity at The University of Texas at Dallas has found that the amount of amyloid plaques in a person's brain predicts the rate at which his or her cognition will decline in the next four years.
Elevated brain amyloid level associated with increased likelihood of cognitive decline
Among a group of cognitively normal individuals, those who had elevated levels in the brain of the protein amyloid were more likely to experience cognitive decline in the following years, according to a study published by JAMA.
Cognitive decline after surgery tied to brain's own immune cells
After undergoing surgery, elderly patients often experience cloudy thinking that can last for weeks or even months.
Insulin resistance may lead to faster cognitive decline
A new Tel Aviv University study published in the Journal of Alzheimer's Disease finds that insulin resistance, caused in part by obesity and physical inactivity, is also linked to a more rapid decline in cognitive performance.
Insulin resistance may lead to faster cognitive decline
A new Tel Aviv University study finds that insulin resistance, caused in part by obesity and physical inactivity, is also linked to a more rapid decline in cognitive performance.
More Cognitive Decline News and Cognitive Decline Current Events

Best Science Podcasts 2019

We have hand picked the best science podcasts for 2019. Sit back and enjoy new science podcasts updated daily from your favorite science news services and scientists.
Now Playing: TED Radio Hour

Anthropomorphic
Do animals grieve? Do they have language or consciousness? For a long time, scientists resisted the urge to look for human qualities in animals. This hour, TED speakers explore how that is changing. Guests include biological anthropologist Barbara King, dolphin researcher Denise Herzing, primatologist Frans de Waal, and ecologist Carl Safina.
Now Playing: Science for the People

#534 Bacteria are Coming for Your OJ
What makes breakfast, breakfast? Well, according to every movie and TV show we've ever seen, a big glass of orange juice is basically required. But our morning grapefruit might be in danger. Why? Citrus greening, a bacteria carried by a bug, has infected 90% of the citrus groves in Florida. It's coming for your OJ. We'll talk with University of Maryland plant virologist Anne Simon about ways to stop the citrus killer, and with science writer and journalist Maryn McKenna about why throwing antibiotics at the problem is probably not the solution. Related links: A Review of the Citrus Greening...