Aging and Cognitive Function can affect your financial decisions.
It’s in our best interest to understand how aging affects financial decisions and address the financial difficulties facing older adults after they reach 55 years. In barely 15 years from now, one in five Americans will be 65 or older. As a result even more people will find themselves at risk where aging may affect their financial decisions.
It’s unsettling when you realize that a family member or loved one seems to be having problems with financial tasks.
Studies show that fluid intelligence diminishes as you grow older — referred to as cognitive decline. A Texas Tech University study reveals that we lose cognitive abilities at the rate of about 2% yearly after age 55.
Fortunately, current studies reveal that it isn’t completely true that aging affects financial decisions.
That’s because your lifetime of acquired financial knowledge and expertise offsets the natural decline in your cognitive skills. University of California, Riverside researchers found proof that our brains build two different types of intelligence — fluid and crystallized.
Fluid intelligence – As we grow older, the rate at which we transform, generate and manipulate new information gets smaller. Studies have revealed that even the healthiest among us have less fluid intelligence as we grow older. But that is just part of the story.
Crystallized intelligence – The development of knowledge and experience -increases until nearly age 60. At that point it plateaus until almost age 80 and ultimately drops off.
Why this is important:
Although fluid intelligence might allow you to more quickly estimate a tip on the fly, your father’s crystallized intelligence could actually help him outperform you when analyzing market trends and stock performance.
Maintain Your Cognitive Function
The truth is that as you grow older you become smarter. Age is not what eventually robs you of your financial decision making abilities.
So what exactly can you do to maintain, or perhaps even enhance, your cognitive function?
Dr. Jeffrey Toth, that maintains that there are several ways to maintain and perhaps improve your cognitive function.
“Physical exercise, social interaction, diet and mental stimulation can all help maintain your cognitive abilities,” says Dr. Toth, psychology professor at the University of North Carolina co-author of the study “Fluency, Familiarity, Aging, and the Illusion of Truth. “And of these four ways, exercising, especially aerobic exercise, is apparently the most important, with mental stimulation a close second, especially when that stimulation is truly challenging and novel.”
Physical exercise, social interaction, diet and mental stimulation. It almost doesn’t matter what kind of programs you do, just do it.