Experts on aging and cognition agree that the ability to manage one’s finances tends to erode with age. The term financial capacity has been defined as “the capacity to manage money and financial assets in ways that meet a person’s needs and which are consistent with his/her values and self-interest.1” Examples include carrying out simple cash transactions, balancing one’s checkbook, reviewing bank statements and evaluating the risks involved in making an investment. And while many people continue to handle their finances well into their golden years, even people with healthy brains tend to experience cognitive decline that affects financial decision-making. According to one study, which analyzed participants’ propensity to make financial mistakes, a person’s financial decision-making ability peaks at age 53, or, more generally, in their 50s.2
Why is it important for families to recognize that aging affects one’s financial capacity? The answer is clear, and it involves planning. There are currently more than 41 million Americans who are 65 and older, and 1 in 9 suffers from Alzheimer’s disease. Every 67 seconds, another person is diagnosed.3 Families need to have a plan in place for when their loved one no longer has the capacity to make financial decisions. They may wish to consider designating an advocate who can oversee their financial transactions and look for irregular activity, such as unpaid bills, repetitive charges or missing deposits.
1 http://www.asaging.org/blog/financial-capacity-aging-society-0
2 http://www.nytimes.com/2015/04/25/your-money/as-cognitivity-slips-financial-skills-are-often-the-first-to-go.html
3 http://www.cnn.com/2014/03/19/health/alzheimers-facts-infographic/index.html