A recent article highlights how aging impacts our financial management skills and suggests ways to maintain mental sharpness as we grow older.
Elderly individuals often become targets for various financial scams, including phishing emails and phone calls aimed at stealing their life savings.
Research from Ian M. McDonough, Associate Professor of Psychology at Binghamton University, examines the impact of age on financial management and strategies for retaining cognitive abilities as we age. The paper, titled “Separating neurocognitive mechanisms of maintenance and compensation to support financial ability in middle-aged and older adults: The role of language and the inferior frontal gyrus,” co-authored by Macarena Suárez-Pellicioni from the University of Alabama, appeared in the Archives of Gerontology and Geriatrics.
The study investigated cognitively healthy adults aged 50 to 74 by using MRI scans to assess brain structure and functional connectivity. Participants also completed basic financial tasks, like managing a checkbook and making change.
Financial management requires various cognitive skills such as memory, executive functioning, and numerical skills, all of which can subtly decline with age.
Previous research on financial management and cognitive decline related to Alzheimer’s primarily focused on the parietal cortex, which handles attention and anticipating future outcomes, McDonough noted. However, not much attention has been given to the specific brain regions responsible for processing math, apart from their development in children.
Math calculations activate two main brain areas, one being the inferior frontal gyrus, which helps in retrieving math information from memory.
“For example, when asked ‘What’s 3 plus 3?’, you answer six without needing to count because it’s committed to memory,” McDonough said. “This knowledge comes from years of memorization.”
When direct recall isn’t available, the middle frontal gyrus is triggered to perform calculations, requiring more cognitive effort and increasing the chance of errors.
“While calculating, people are more prone to mistakes. Having the answer memorized helps ensure accuracy,” McDonough shared. “Memorized answers lead to quicker, more efficient, and precise responses.”
With normal aging, the prefrontal cortex decreases in size, and with Alzheimer’s, the shrinkage is more pronounced. Consequently, older adults may struggle with financial tasks as their reliance on memory wavers and they must engage different brain regions to compensate for deficits.
“These changes may highlight a growing susceptibility to financial scams,” he said. “Understanding brain changes can guide interventions aimed at these regions.”
Maintaining Independence
Effective financial management likely hinges more on language skills than on mere calculations. The study found that individuals with stronger language abilities tended to perform better in financial tasks, likely due to enhanced connectivity between various brain areas.
McDonough’s findings indicate that higher household income and financial literacy—both indicators of socioeconomic status—are vital in defending against age-related declines in financial competence. A background promoting financial literacy fosters the necessary memories for financial decision-making.
Financial education may enhance decision-making skills regarding money as individuals age. Regular practice of learned math skills can help maintain proficiency in financial management throughout life.
Both individuals and caregivers should remain vigilant for signs of cognitive decline that may render older adults more vulnerable to financial exploitation. Utilizing financial tools, technologies, and legal protections, such as establishing a power of attorney for automated payments, can help safeguard older adults’ finances while ensuring they retain the ability to make decisions.
“Managing finances is crucial for maintaining independence in later years,” McDonough emphasized. “We must develop interventions that bolster brain health and assist people in effectively managing their finances.”
