Wisdom Really Does Come with Age: Older people's knowledge and experience means they make better decisions

By Emma Innes, Mail Online

Excerpt: Although older people's brains slow down, experience and knowledge more than make up for it - helping them make better financial decisions, a study shows.

It is the first time two types of intelligence - fluid and crystallised - have been tested among different age groups.

Fluid intelligence is the ability to learn and process information while the latter refers to experience and accumulated knowledge.

A series of economic tests found the older group of 163 participants aged 60 to 82 were better than the 173 younger counterparts of 18 to 29.

This included 'temporal discounting' (how much people discount future gains and losses), loss aversion (how much the valuation of losses outweigh gains of the same magnitude), financial literacy (understanding financial information and decisions) and debt literacy (understanding debt contracts and interest rates).

The older group exhibited greater patience and better financial and debt understanding.

They were also somewhat less afraid of losses but the result did not reach standard levels of significance.

The study, published in the journal Psychology and Aging, said past research has found fluid intelligence declines with age but provides no definitive conclusion as to whether decision-making abilities sag.

Dr Ye Li, of California University in Riverside, said: ‘The findings confirm our hypothesis that experience and acquired knowledge from a lifetime of decision making offset the declining ability to learn new information.’

The average age of the world's population is rising so understanding how well older adults make decisions is crucial. They are faced with an increasing number of important choices related to their retirement finances and health care...

Read the article.

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