Aging adults beware: The faith you have in your financial skills might be deceiving.
In fact, while confidence in one's own financial abilities stays stable and even rises with regard to certain topics during older age, financial literacy scores drop — by about 1.5 percentage points every year — after age 60, according to the results of a new study.
That linear decline seems to happen regardless of your sex, wealth and even your education and experience with the stock market, said study co-author and Texas Tech University professor Michael Finke.
Finke, along with Texas Tech professor Sandra Huston and University of Missouri finance professor John Howe, looked at literacy scores of more than 3,870 adults aged 60 and older. Topics in the assessment included investing, borrowing, insurance and basic financial knowledge.
"The changes in ability are similar to what happens with driving," Finke said. "It happens gradually, in a way we don't necessarily perceive one year to the next, and that makes us vulnerable."
Even though literacy scores dropped with age, when the study subjects were asked to rate their own knowledge of each topic in the test, general self-confidence did not decrease at all with seniority. And when it came to insurance, subjects actually assessed their knowledge more positively as they got older — despite the fact that their abilities were declining.