Age differences in financial decision making: The benefits of more experience and less negative emotions

The emerging literature on aging and decision making posits that decision‐making competence changes with age, as a result of age differences in various cognitive
and noncognitive individual‐differences characteristics. In a national life‐span sample from the United Kingdom (N = 926), we examined age differences in financial
decisions, including performance measures of sunk cost and credit card repayment decisions, and self‐report measures of money management and financial decision
outcomes. Participants also completed four individual‐differences characteristics that have been proposed as relevant to financial decision making, including two cognitive
ones (numeracy and experience‐based knowledge) and two noncognitive ones (negative emotions about financial decisions). First, we examined how age was related
to the four financial decision‐making measures and the four individual‐differences characteristics. Older age was correlated to better scores on each of the four financial
decision‐making measures, more experience‐based knowledge, less negative emotions about financial decisions, whereas numeracy and motivation were not
significantly correlated with age. Second, we found that considering both the two cognitive and the two noncognitive individual‐differences characteristics increased
predictions of financial decision making, as compared with considering either alone. Third, we examined how these four individual‐differences characteristics contributed
to age differences in financial decision making. Older adults’ higher levels of experience‐based knowledge and lower levels of negative emotions seemed to especially
benefit their financial decision making. We discuss implications for theories on aging and decision making, as well as for interventions targeting financial decisions.