​In order not to delay, we note that the age at which we are most ready to make the best financial decisions is 54.

The figure comes from a study last year led by Rafal Homick, an Australian economist at the Center of Excellence for Aging Research.

According to him, the risk of making bad decisions increases with age, especially when we combine the increasing complexity of financial options (increasingly complex products) with a low degree of financial literacy.

In Romania, almost a third of respondents in the July Eurobarometer on money, savings and investments were able to correctly answer only one question out of 5, which is much lower than the European average.

In addition, the cited study shows that aging brings with it cognitive decline (which varies from person to person) that affects the ability to correctly assess risks.

Financial literacy peaks at age 54 and then declines

More than half of people over 65 with low levels of financial literacy make financial decisions in their own households, compared to a third of people aged 45-54.

At the same time, confidence in one’s own judgments about money is highest at an older age. It is estimated that many people over the age of 60 suffer from a mild form of cognitive impairment. This manifests as problems with memory, language or thinking/judgment.

Not so serious that they cannot solve simple problems, but which in the case of complex financial decisions can cause problems.

People with low financial literacy take fewer risks and do not think about the long-term future, but only about the short-term. For example, among 45-54-year-olds, only 18% think about what they can expect in 5 years, compared to 35% of the highly financially literate group. In other words, people with low financial literacy are more impulsive and focused on the present.

Few financially illiterate people save. Among 25-34-year-olds, about a quarter save regularly, compared to 42% for the more financially literate group.

Interestingly, satisfaction with money increases with age, both for the financially literate and for the rest, with a gap of almost 15 percentage points between the young and the elderly (in terms of financial satisfaction).

More than 80% of people over 75 are confident in their ability to make financial decisions and understand financial contracts, the study also shows.

Overconfidence in the ability to manage money is also evident, although financial tasks become more difficult with age. Combined, lack of financial education, increased self-confidence, increased responsibility, and cognitive aging increase the likelihood that the decisions made will not be among the best.

Older people tend to manage their money more carefully, and some continue to save for retirement. What could be the reasons? Hazel Bateman and Jennifer Alonso-Garcia of CEPAR sought to understand the conundrum by asking approximately 2,000 older adults in Australia and Europe:

The answers were:

1. For the joy of having enough money at hand

2. autonomy – financial independence

3. To have money in case you get sick. And old age is often accompanied by various ailments.

Making financial decisions requires skills that differ by age. When you are 20 years old, you are good at perceiving information and making calculations. Or what is called “fluid intelligence” but you don’t have much life experience (“crystallized intelligence”). With age, fluid intelligence tends to decrease, and crystallized intelligence tends to increase.

Of course, we can make financial mistakes at any age, but research shows that the fewest mistakes are made at age 54, the cited study shows