Aging, financial literacy, and fraud

  • David Bennett David Bennett
  • Keith Gamble Keith Gamble
  • Lei Yu Lei Yu
  • Patricia Boyle Patricia Boyle

This study examines how cognitive changes associated with aging impact the financial decision making capability of older Americans. We find that a decrease in cognition is associated with a decrease in financial literacy. Decreases in episodic memory, perceptual speed, and visuospatial ability are associated with a decrease in numeracy, and decreases in episodic and semantic memory are associated with a decrease in financial knowledge. A decrease in cognition alsopredicts a drop in self-confidence in general, but importantly, it is not associated with a drop in confidence in managing one’s own finances. Participants experiencing decreases in cognition doshow an increased likelihood of getting help with financial decisions; however, many participants experiencing significant drops in cognition still do not get help. This study also examines the risk factors for an older American being victimized by financial fraud. We find that overconfidence in one’s financial knowledge is a significant predictor of the odds of falling victim.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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