SOURCES: Ye Li, M.B.A., Ph.D., assistant professor of Management and Marketing, University of California, Riverside; Daniel Marson, Ph.D., director, Division of Neuropsychology and Alzheimer's Disease Center, University of Alabama at Birmingham; Dec. 23, 2014, Proceedings of the National Academy of Sciences
TUESDAY, Dec. 23, 2014 (HealthDay News) -- New research suggests that decades of financial experience help seniors stay smart about money matters, despite the mental declines that come with age.
It all has to do with the various ways the brain handles financial issues, explained study lead author Ye Li, an assistant professor of management and marketing at the University of California, Riverside.
"Two different types of intelligence provide separate pathways to good financial decisions," he said. "One relies on 'active thinking' that declines with age, and one relies on expertise and knowledge that improves with age."
It's perfectly normal for various elements of brainpower to decline with advancing years, added clinical neuropsychologist Daniel Marson, director of the Alzheimer's Disease Center at the University of Alabama at Birmingham. Marson, who was not involved in the new study, said that short-term memory, thinking speed and "the ability to manipulate multiple sources of information," also known as mental "multitasking," can all falter with age.
Deficits in these areas would "presumably affect a person's ability to make financial decisions," he said, while diseases like Alzheimer's would make things worse.
And while it's hard to know how much seniors lose when it comes to financial-related skills, it's clear that they're often the victims of financial scams. In fact, one 2011 study in the Journal of General Internal Medicine found that one in 20 people aged 60 and older in New York state said they'd been financially exploited within the past year -- most of the time by a family member.
So just how equipped is the normal senior to competently deal with financial matters? To find out, Li's team examined the results of survey questions and tests given to 478 U.S. residents aged 18-86.
The participants -- who were paid about $40 on average if they finished four waves of tests -- answered questions designed to analyze their financial acumen in areas such as health insurance and credit card use.
The researchers also analyzed credit scores that they'd obtained from many of the participants, especially those who were older and had developed credit histories.
Older people in the study typically had higher credit scores than younger people, Li's team found. The reason? Seniors tended to have financial knowledge that made a real difference, even though other brain skills may have declined with aging.
"Older people are still good at making decisions that they've made many times before and have developed sufficient expertise with," Li explained.
"However, they may run into trouble when it comes to new and complex decisions that they have less experience with," he added. "For example, choosing a new health care plan after retirement or planning how to make retirement savings last the rest of their life are extremely difficult decisions with a lot of variables that will tax older decision makers."
Li believes that the findings reinforce the need "to recognize older people's limitations when it comes to new and complex financial decisions" and to develop ways to help them make money decisions, he said.
"On the other hand, it also suggests that younger people also need help in terms of improving their limited financial literacy," he added. "In fact, this is where parents' greater financial wisdom can help quite a bit."
For his part, Marson praised the study, especially its inclusion of credit scores. But he cautioned that it doesn't show if the credit scores of seniors had declined over time in conjunction with their aging.
The study is published in the Dec. 23 issue of the Proceedings of the National Academy of Sciences.
For more on financial scams targeting seniors, head to the National Council on Aging.