Staying sharp: Study explores how brain changes may affect financial skills

A new paper published by Ian M. McDonough, associate professor of psychology at Binghamton University, reveals how age-related changes affect the way we handle our finances and how we stay sharp as we age. “Maintenance and compensation of dissociated neurocognitive mechanisms to support economic capability in middle-aged and older adults: The role of language and inferior frontal gyrus” co-authored by Macarena Suárez-Pellicioni, University of Alabama, was recently published in Archives of Gerontology and Geriatrics.

The study, which focused on cognitively healthy adults aged 50 to 74, used MRI scans to measure brain structure and functional connections; study participants also performed simple financial tasks, such as balancing a checkbook or making change.

Financial tasks rely on multiple cognitive domains, including memory, executive function, and numerical abilities; aging causes minor declines in all of these areas.

MacDonald said early research into financial management and Alzheimer’s-related brain decline focused on the parietal cortex, the part of the brain responsible for attention and modeling possible future outcomes. Except for the development of areas of the brain associated with mathematical processing in children, little attention has been paid to these areas.

Mathematics involves two different brain areas. One of these is the inferior frontal gyrus, which is specialized in accessing mathematical information contained in memory.

“If I ask, ‘What is 3 plus 3?’ you know it’s six; you don’t have to count 3 plus 3,” McDonald explained. “You remember it because you memorized it by rote and it has been ingrained in you over the years.”

If you don’t have an easy-to-remember answer and need to do calculations, your middle frontal gyrus comes into play.

“When people do calculations, they are more likely to make mistakes. If you remember it, you remember the correct answer,” McDonald said. “When you have these verbal expressions, you will be faster, more efficient, and more accurate.”

As part of normal aging, the brain’s prefrontal cortex shrinks. In Alzheimer’s disease, areas of the frontal cortex shrink more rapidly. As a result, individuals may begin to make more errors on financial tasks because their brains no longer rely on memorized answers and instead recruit different areas to compensate for the shortcomings.

“They are potential markers that may indicate that people are more vulnerable to fraud,” he said. “If we understand how the brain changes, this can inform interventions that target these brain regions.”

maintain independence

Ultimately, successful financial management may rely more on language processing than pure computation. Researchers found that people with better language skills were more likely to perform well on financial tasks, possibly because of increased connectivity between different parts of the brain.

McDonald’s research shows that higher household income and financial literacy (both markers of socioeconomic status) are two major factors that protect against age-related declines in financial ability. Relying on memory first requires developing memory skills, which is more likely to be possible in an environment that promotes financial literacy.

Financial education can help people keep their decision-making skills sharp when it comes to money. Keeping math verbally automatic—essentially practicing the math skills you learned in school—may help support a lifetime of good financial management.

However, individuals and caregivers also need to be alert to cognitive decline, which may make older adults more vulnerable to financial fraud and abuse. Financial tools, technology, and legal safeguards (such as power of attorney for automated payment systems) can protect seniors while preserving their decision-making autonomy.

“Managing your finances is important to maintaining independence later in life,” says McDonald. “We need interventions to enhance brain function and help people stay healthy as they manage their finances.”