57 Financial Literacy in Older Adults: Cognitive, Demographic, and Personality Factors Related to Discrepancies between Objective Financial Knowledge and Subjective Financial Confidence
Authors: Mis Rachel , Hackett Katherine , Giovannetti Tania 
Published: December 2023

Objective:

Management of finances is one of the earliest domains of daily living to decline in the neurodegenerative disease process, and poorer financial literacy is associated with worse cognition even in healthy, normative aging. However, some studies have demonstrated that cognitively normal older adults demonstrate preserved real-world financial outcomes despite the presence of age-related cognitive decline. One account for this discordance posits that older adults rely on intact financial knowledge to circumvent negative effects of declining fluid cognitive abilities. Also important to real-world financial behavior is insight into one’s level of financial knowledge and expertise (i.e., subjective financial confidence), which in some studies has been shown to have an equal or stronger influence on real-world financial behaviors compared to objective financial knowledge. This study investigated older adults’ financial abilities by identifying groups of individuals with discrepancies between objective financial knowledge and subjective financial confidence and exploring cognitive and non-cognitive (demographic, personality) factors associated with discrepancy group membership.

Participants and Methods:

Participants were 4,610 older adults (M age 71.18 ± .91) from the Wisconsin Longitudinal Study who answered 12 true-false questions on financial concepts (accuracy) and rated their confidence on each response. Standardized scores of accuracy and confidence were used to classify participants into three discrepancy groups (1) Overconfident (confidence >1 SD above accuracy), (2) Underconfident (accuracy >1 SD above confidence), and (3) Equal (accuracy and confidence within 1 SD). Logistic regression examined factors associated with discrepancy group membership.

Results:

Higher financial accuracy was moderately correlated with greater confidence (r=.42, p<.001). Approximately 29% of participants had standardized accuracy and confidence scores that differed by one standard deviation or more, with 14% of participants belonging to an “Overconfident” group and 15% to an “Underconfident” group. Lower likelihood of Overconfidence group membership was associated with higher levels of education (OR = .87, 95% CI [.82, .93], p<.001) and better cognitive performance on tests of delayed recall (OR = .90, 95% CI [.84, .97], p=.006) and numerical reasoning (OR = .94, 95% CI [.91, .97], p<.001), while higher extraversion was associated with increased likelihood of Overconfidence (OR = 1.03, 95% CI [1.00, 1.05], p=.04). Lower likelihood of Underconfident group membership was associated with better performance on cognitive tests of delayed recall (OR = .90, 95% CI [.84, .96], p=.002), male sex (OR = .60, 95% CI [.47, .77], p<.001), and lower levels of conscientiousness (OR = .95, 95% CI [.92, .99], p<.001), while better letter fluency performance was associated with increased likelihood of Underconfidence (OR = 1.03, 95% CI [1.00, 1.06], p=.04).

Conclusions:

Objective financial knowledge and subjective financial confidence are related yet distinct aspects of financial literacy. Discrepancies between financial knowledge and confidence are related to both cognitive and non-cognitive factors, such as personality and differing life experiences associated with educational attainment and sex-related social roles. Results may help clinicians identify profiles of older adults (e.g., high confidence and low knowledge/"Overconfident”) at risk for dysfunctional financial behaviors, including susceptibility to fraud and/or irresponsible financial decision-making.