A very recent study suggests that there is a visible link between confidence in financial literacy and cognitive health in older persons, and that financially literate seniors are less likely to develop diseases such as Alzheimer’s
The study argues that financial literacy is crucial for independence and well-being in old age. Lower financial literacy is not only associated with poorer decision making , but it is also implicated in poorer cognitive health and an increased risk of dementia. Prior research has focused primarily on objectively measured literacy (i.e., what people actually know). However, the extent to which confidence in literacy (i.e., what people believe they know or perceived literacy) is implicated in cognitive outcomes has not been studied.
According to financial studies, confidence in literacy is as important as objective literacy with regard to financial behaviors. Both are associated with a range of financial decisions including credit card payments, borrowing behaviors, investment choices, and decisions to seek financial advice. Adults with high confidence in their financial literacy and high objective literacy are substantially more likely to engage in activities promoting greater financial well-being. Some work even suggests that confidence in financial literacy is a stronger predictor of financial outcomes.
This research study concluded that confidence in financial literacy is associated with a decreased risk of Alzheimer’s dementia and slower decline in cognition, above and beyond objectively measured financial literacy. Further, older adults who express underconfidence relative to their actual level of financial literacy have greater risk of developing Alzheimer’s dementia and experience faster cognitive decline. While it is not completely clear why this relationship exists, it could be that confident people are motivated to engage with the world and actively seek to acquire new information. Further, in the face of distraction and setbacks, confident people are more persistent and tend to exhibit greater effort toward meeting their goals.
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