When should you stop managing your own money?
Some time ago an article in Next Avenue, www.nextavenue.org, an excellent website for seniors, reprinted a prior article from MarketWatch.com and addressed a common question with no easy answer: How do you handle your finances as you age?
The article, titled “At What Age Are You Too Old to Manage Your Money?” raises a very sensitive topic. Recognize first that question can have very different answers depending on the individual. In a somewhat similar vein, people might ask at what age should you stop driving or when do you need to have someone come to your home to help with daily tasks.
According to MarketWatch.com, there was both good news and not so good. Different tasks require different abilities and, while you might be able to handle one very well, another might escape you.
A study conducted by the Center for Retirement Research at Boston College, “Cognitive Aging and the Capacity to Manage Money,” differentiates between the ability to pay, say your gas or electric bill, and the ability to make sound financial decisions such as investment decisions you might make with a financial advisor.
First, the good news. Assuming an individual has prior experience paying bills and keeping track of bank accounts, most people not suffering from cognitive impairment can be expected to continue managing their own money into their 70’s, 80’s (and, for some, possibly 90’s) for routine matters provided they were well organized in the first place.
If you were not well organized to begin with, there is no great likelihood you will suddenly gain that ability later. Those who are inexperienced and who, for instance, left this function to their spouses, could be expected to need help to do this.
However, according to the researchers, “financial capacity relies on two key abilities: 1. performing financial tasks, which mostly requires crystallized intelligence or knowledge; and 2. making financial judgments, which requires a mix of knowledge and fluid intelligence like memory, attention and information processing.”
In other words, while you might perform perfectly well paying your electric bill or your mortgage, your decision making ability to make sound financial judgments, like recognizing whether a pro-