Wise old financier
Do Financial Decisions Get Better With Age?
Translated by Natalia CHERKASHINA, Banki.ruWe often hear that "age is just numbers."
But does the ability to manage these very numbers come with age? The older a person is, the more responsible decisions he has to make. Website Investopedia.com he talks about how age affects a person's financial behavior, how middle-aged investors behave, as well as how to avoid some "age-related" financial traps.
The most "monetary" ageAccording to a study by the sociological center Social Science Research Network (SSRN), the heyday of financial activity with a minimum of errors falls on 53 years.
SSRN specialists examined ten different types of borrowers' behavior and compared them with several age groups. In addition, sociologists have identified a number of financial mistakes – irrational use of credit cards, inadequate assessment of their own real estate, obtaining loans at inflated rates and with an excessive number of penalties and commissions. As a result, it turned out that middle-aged people are less prone to such mistakes than the older or younger generation.
As follows from the results of the study, a person begins to acquire the ability to make reasonable financial decisions between 20 and 30 years, reaching a peak by 50, and then this indicator again sharply decreases between 70 and 80 years – scientists compare this model with an inverted English letter U. They associate the upward trend with getting an education in youth, including acquiring financial knowledge. The decline in the later years of life is related to the weakening of cognitive functions.
Cognitive dissonanceSome papers, including a study published by the neurology journal Nature Neuroscience, provide evidence that older people tend to react less acutely to financial losses than young people.
According to scientists, this is not caused by a weakening of cognitive function, but by the fact that pensioners have experienced money ups and downs more than once and want to focus on more positive aspects of life. Thus, representatives of the older generation may be more inclined to risk money contrary to the established stereotype of their conservatism.
Other studies have shown that older people prefer not to make difficult financial decisions alone. In addition, they tend to avoid problems more than the young. This means that representatives of the older generation are more likely to postpone decisions that carry an emotional burden, for example, such as planning the purchase of real estate, the sale of large investment assets or the dismissal of a financial consultant who did not meet expectations, if he also became a "friend". In addition, those who are older are more likely to seek help from professional consultants.
Another potentially dangerous aspect of "age–related" financial behavior is that older people are more likely to fall into the trap of feeling "I already know this." The reason for this may be the mentioned decrease in cognitive activity, but the fact remains that the older generation is more inclined than the youth to concentrate all assets in one or two long-familiar companies, which affects the possibility of diversifying the investment portfolio. At the same time, the elderly are more vulnerable to fraud on the Internet or to unscrupulous telemarketing technologies.
Aging is inevitable. However, many of the troubles associated with this process can be avoided.
Everything needs skill, tempering, trainingOne of the undoubted advantages of a more mature age is that we become wiser and mistakes are just a consequence of weakening cognitive function, and not age–related changes.
And cognitive function is quite amenable to training, says Jeffrey Toth, professor of psychology at North Carolina State University. "Four ways to keep your cognitive abilities in good shape are physical activity, exercises for mental stimulation, diet and socialization. Moreover, physical activity has a good effect on mental abilities in the first place, and mental stimulation is second in importance," the scientist explains.
Along with bringing positivity into your life, it is equally important to avoid negativity, adds Jeffrey Toth. In particular, negative factors include smoking, excessive addiction to alcohol, fatty foods and chronic lack of sleep.
A balanced lifestyle is necessary for investors, accountants, bankers and just anyone who wants to stay in good financial shape – after all, you need to take care of your wisdom for the younger generation.
The sooner the betterIt is worth starting the search for the best financial solutions in middle age.
Perhaps you should take care of the selection of a reliable financial adviser. In addition, it is necessary to deal with taxes, personal finances, inheritance issues as early as possible in order to avoid possible troubles in the future.
Starting from a certain point, your age should become more than just a number. The good news is that everything is in your hands. Famous showman and writer George Barnes, whose successful career continued even when he was over 90, said: "We're all getting old, there's nothing we can do about it. But why become old at the same time?" Financial education, a healthy lifestyle and reasonable planning – from a young age – opens up excellent prospects for life.
Portal "Eternal youth" http://vechnayamolodost.ru29.11.2010