The effects of normal aging on multiple aspects of financial decision-making

Objectives: Financial decision-making (FDM) is crucial for independent living. Due to cognitive decline that accompanies normal aging, older adults might have difficulties in some aspects of FDM. However, an improved knowledge, personal experience and affective decision-making, which are also related to normal aging, may lead to a stable or even improved age-related performance in some other aspects of FDM. Therefore, the present study examines the effects of normal aging on multiple aspects of FDM and determines the discriminant validity of the applied FDM tests. Methods: One-hundred and eighty participants (range 18-87 years) were assessed with eight FDM tests and several standard neuropsychological tests. Age effects were evaluated using hierarchical multiple regression analyses. The validity of the prediction models was examined by internal validation (i.e. bootstrap resampling procedure) as well as external validation on another, independent, sample of participants (n=124). Multiple regression analyses were also used to determine the discriminant validity of the applied FDM tests. Results: On a relatively basic level of FDM (e.g., paying bills or using FDM styles) no effects of aging were found. However more complex FDM, such as making decisions in accordance with specific rules, becomes more difficult with advancing age. Furthermore, an older age was found to be related to a decreased sensitivity for impulsive buying. These results were confirmed by the internal and external validation analyses. Only small amounts of variance of seven out of eight FDM tests could be explained by standard measures of cognition. Conclusion: Normal aging has a negative influence on a complex aspect of FDM, while other aspects remain relatively stable or improve with age. The FDM test battery used in the present study has good discriminant validity to standard tests of cognition, indicating that standard neuropsychological measures for cognition are not helpful in the evaluation of an individual’s ability to make financial decisions.