Aging and Financial Decision Making

Gamble, Keith Jacks; Boyle, Patricia A.; Yu, Lei; Bennett, David A.

doi:10.1287/mnsc.2014.2010

Cited by 106 publications

(69 citation statements)

References 16 publications

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“…16 Exceptions to this behavioral trait are Japanese individuals (Sekita 2011). financial decisions, this overconfidence might be a problem, especially in situations where individuals are not aware of this bias . In particular, older people tend to have a high confidence in their financial literacy although they do rather poorly on the test questions as well as with respect to their actual financial behavior (Lusardi and Tufano 2015;Lusardi and Mitchell 2011a, c;Gamble et al 2015). In a cross-country study including American, Dutch, and German households, Bucher-Koenen et al (2016) recently document gender differences not only in test-based but also in self-reported levels of financial literacy.…”

Section: Self-assessed Financial Literacymentioning

confidence: 99%

“…27 Low levels of financial literacy among the old is also problematic as individuals aged 60 and older hold about 50% of the wealth in the U.S. (Finke et al 2016). With respect to cognitive changes associated with aging, Gamble et al (2015) show that a decrease in episodic memory is associated with decreasing abilities in numeracy. In addition, a decrease in semantic memory associated with aging comes along with a decrease in financial knowledge.…”

Section: Agementioning

confidence: 99%

“…As already mentioned in Sect. 2.3, there is a wide discrepancy between test-based and self-assessed financial literacy for the elderly as this group shows high levels of overconfidence: Gamble et al (2015) and Finke et al (2016) show that confidence in financial abilities does not decline with age, making the elderly particularly vulnerable to financial scams and fraud (Deevy et al 2012). Analyzing the SAVE survey, Bucher-Koenen and Lusardi (2011) underscore this evidence for Germans.…”

Section: Agementioning

confidence: 99%

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Financial literacy, financial advice, and financial behavior

2017

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In this survey, we review the voluminous body of literature on the measurement and the determinants of financial literacy. Wherever possible, we supplement existing findings with recent descriptive evidence of German households' financial literacy levels based on the novel Panel on Household Finances dataset, a large-scale survey administered by the Deutsche Bundesbank and representative of the financial situation of households in Germany. Prior research not only documents generally low levels of financial literacy but also finds large heterogeneity in financial literacy across the population, suggesting that economically vulnerable groups are placed at further disadvantage by their lack of financial knowledge. In addition, we assess the literature evaluating financial education as a means to improve financial literacy and financial behavior. Our survey suggests that the evidence with respect to the effectiveness of the programs is rather disappointing. We also review the role of individuals' financial literacy for the use of professional financial advice and assess whether expert intervention can serve as a substitute to financial literacy. We conclude by discussing several directions for future research.

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Section: Self-assessed Financial Literacymentioning

confidence: 99%

Section: Agementioning

confidence: 99%

Section: Agementioning

confidence: 99%

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Financial literacy, financial advice, and financial behavior

2017

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“…Although older adults face well‐documented age‐related decline in cognitive abilities that could harm their ability to make financial decisions (Gamble, Boyle, Yu, & Bennett, ), it has been suggested that they also have more experience‐based knowledge that could benefit financial decisions (Bruine de Bruin et al, ; Bruine de Bruin, Parker, & Fischhoff, ; Kovalchik, Camerer, Grether, Plott, & Allman, ; Li, Baldassi, Johnson, & Weber, ; Li et al, ). Additionally, older adults may experience changes in emotions and motivation, which could be relevant to making decisions (e.g., Bruine de Bruin, ; Strough, Bruine de Bruin, & Parker, in press; Strough, Parker, & Bruine de Bruin, ).…”

Section: Introductionmentioning

confidence: 99%

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

Eberhardt

Bruin

Strough

2018

Behavioral Decision Making

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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.

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“…about a 1% vs 0.1% risk; Best and Charness (2015)). Studies have also shown that financial literacy scores decline by about 2 percent per year after age 60 (Finke et al 2011;Gamble et al 2015).…”

Section: Introductionmentioning

confidence: 99%

A personal financial risk assessment intervention decreases investment fraud susceptibility in older adults

Martin¹,

J²,

Krastev³

et al. 2020

Preprint

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Older adults are more often the targets and victims of financial fraud, with Americans aged 65and older being 34% more likely to lose money due to fraud than those in their forties. This greater susceptibility to fraudulent offers may be due to a shift from more deliberative thinking to automatic thinking that occurs during normal ageing. This experiment tests an intervention that engages deliberative thinking about risk preferences (aPersonal Risk Assessment) as a means of decreasing susceptibility to an email with tell-tale signs of a fraudulent investment. The intervention was delivered to younger (aged < 60) and older (aged 60+) groups. Compared to age-matched controls, the intervention reduced susceptibility in the older group but not the younger one. This difference between the groups may be due to different underlying risk preferences, with the younger group having more risk tolerance. Prompting older adults to deliberately reflect on their risk-aversive preferences thus appears to counteract the effects of age on susceptibility to fraud. This experiment provides a new means of reducing susceptibility to fraud among older individuals. Future research should examine ways of decreasing susceptibility in younger populations and investigate underlying mechanisms of fraud susceptibility in both age groups.

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Aging and Financial Decision Making

Cited by 106 publications

References 16 publications

Financial literacy, financial advice, and financial behavior

Financial literacy, financial advice, and financial behavior

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

A personal financial risk assessment intervention decreases investment fraud susceptibility in older adults

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