Financial Skills Peak Just After 50

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A new study is out saying that financial consumers over the age of 50  - age 53, specifically - start losing focus and proper decision-making skills on key personal financial issues like banking and investing. Is there anything to it? Let’s take a deeper look.

The study was done by the Brooking Institute and published in October, 2009 (you can find it here.)

The study’s authors, which included two Federal Reserve officials and two mathematics professors, examined 10 key financial and/or investment decisions, like making a credit card transfer or figuring out bank fees and interest rates.

Their conclusion? That Americans’ financial acumen begins to dim at age 53, at which point poorer financial decisions can lead to higher fees, missed investment opportunities, and even higher credit card debt.

Part of the problem is context. The study’s authors noted that 25 years ago, Americans of all ages had fewer financial decisions to make. There weren’t as many 401k’s, fewer people had credit cards (and the ones who did only had one or two pieces of plastic); and banks had fewer products and services beyond basic savings and checking accounts.

Oh, and there wasn’t the Internet to expose everyone to countless potential financial opportunities (and potential migraines) back in 1984, either.

Thus, a primary point of the Brookings study is that Americans don’t have the luxury of taking financial decisions lightly – or executing them with less intellectual vigor – in 2009.

The economists who created the study also found something else of interest to over-50 financial consumers. Younger consumers, presumably more on the ball than their older counterparts, pay lower interest rates and smaller fees for things like credit cards, investment accounts, and bank services. But after age 50, for reasons the study authors link to advanced age and diminished cognitive skills, average financial fees and interest rates paid out by consumers begin to rise.

Don’t look for a government bailout for bad financial decisions made after 50. But do look for more studies and academic literature on the effects of aging on those ubiquitous Baby Boomers, 77 million strong, many of whom are marching into older age... and some pretty big financial decisions.

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