Conceptual and Empirical Approaches to Financial Decision-making by Older Adults: Results from a Financial Decision-making Rating Scale

The WALLET Study: Financial Decision Making and Key Financial Behaviors Associated with Excess Spending

OBJECTIVES

The Wealth Accumulation and Losses in Later life Early Cognitive Transitions (WALLET) study data was used to examine correlates with excess spending in older adults who do and do not have early memory loss.

METHODS

The WALLET study collected detailed financial information from participants' primary checking account statements (n = 150). Information on participant sociodemographic, health, and disability status, memory functioning, financial decision-making, and financial literacy was also collected. Participants either had no memory problems or early memory loss. Bivariate and multiple regression analyses were conducted.

RESULTS

The early memory loss group had significantly higher excess spending than those with no memory loss. Financial decision-making and higher-risk financial behaviors were also linked to higher excess spending. Early memory loss was no longer statistically significant after accounting for financial stressors and resources.

CONCLUSIONS

The multidimensional nature of financial capacity assessment has long been known. The WALLET study data is unique, however, in that it demonstrates the links between excess spending with decision-making, early memory loss, and a set of specific financial behaviors.

CLINICAL IMPLICATIONS

Real-world assessments of financial management and financial decision-making yield important information about how older adults are managing money and making key financial decisions. Checking account reviews can be used to determine excess spending.

A person-centered approach to financial capacity: early memory loss, financial management and decision-making

OBJECTIVES

Previous research has noted that a person-centered approach to financial capacity assessment is feasible. This study of personal finance included a review of 12 months of checking account statements followed by research interviews to investigate income, spending, financial literacy, and financial decision-making. The objective of the study was to determine the convergent validity of excess spending to contextual aspects of financial decision-making, financial literacy, and early memory loss.

METHOD

Participants were 114 adults over the age of 60 who came primarily from two research registries; the Healthier Black Elders registry and the Michigan Alzheimer's Disease Research Center registry. After sharing their checking statements participants completed two telephone interviews. Bivariate and multivariate analyses were used to compare those with no memory loss to the memory loss group, and to determine which measures were significantly related to excess spending.

RESULTS

There was a significant difference in excess spending between those with early memory loss and those with no memory loss. There was a significant difference in financial decision-making risk scores between the groups, as well as on a memory measure and a financial literacy measure. In a hierarchical regression analysis financial decision-making was the only measure significantly related to excess spending.

CONCLUSION

This study documented the convergent validity of person-centered measures of personal spending and financial decision-making with early memory loss. Early memory loss was related to both excess spending and contextual aspects of financial decision-making.

Self-Reported Chronic Stress Is Unique Across Lifetime Periods: A Test of Competing Structural Equation Models

BACKGROUND AND OBJECTIVES

Chronic stress can have deleterious effects on physical and mental health. However, self-report measures of chronic stress typically only assess stress recently, ignoring ongoing or repeated stress throughout the life span. The present study tested whether retrospective judgments of stress across different lifetime periods offer unique information that cannot be ascertained by measures of recent chronic stress.

RESEARCH DESIGN AND METHODS

A survey was given to 271 adults aged 46-81 using Amazon's Mechanical Turk. The questions assessed self-reported stress across multiple domains (e.g., general stress, financial stress, interpersonal stress) from well-known and validated surveys. Also, items were added to assess different lifetime periods of self-reported stress, including one's childhood, 20s/30s, and 50s/60s. Using structural equation modeling, we tested competing models for how lifetime periods and stress domains might relate to one another.

RESULTS

The best fitting model revealed that different domains of stress (discrimination, loneliness, personal, and general stress) were highly correlated with one another within a given lifetime period but that the different lifetime periods (childhood, 20s/30s, 50s/60s, and current) were relatively independent.

DISCUSSION AND IMPLICATIONS

Current measures assessing the frequency or strength of "chronic stress" are misleading because they do not capture ongoing or repeated stress throughout the life span. Past experiences convey unique information about one's chronic stress, offering a new perspective on the meaning of "chronic stress" from a life-course perspective, consistent with previous stress accumulation models.

Novel methods for assessment of vulnerability to financial exploitation (FE)

Financial exploitation (FE) is a complex problem influenced by many factors. This article introduces two novel methods for assessment of FE vulnerability: (1) performance-based measures of financial skills using web-based simulations of common financial tasks; (2) scam vulnerability measures based on credibility ratings of common scam scenarios. Older adults who were male, younger, Hispanic, more educated, with higher incomes performed better on the simulated financial tasks. Better performance was also related to higher cognitive function and numeracy, and more experience with technology. On the scenario-based measures, older adults who were male, younger, African American, less educated, and lower income showed higher FE vulnerability. Higher scam vulnerability was also related to poorer performance on the simulated financial tasks, lower cognitive function, less experience with technology, more financial conflict/anxiety, more impulsivity, and more stranger-initiated FE. Findings indicate that these novel measures show promise as valid indicators of vulnerability to FE.

Cross-Validation of the Lichtenberg Financial Decision Rating Scale

OBJECTIVES

The Lichtenberg Financial Decision Rating Scale (LFDRS) is a person-centered tool for analyzing the integrity of financial decision-making abilities. Initial studies supported its reliability and validity (Lichtenberg et al., 2020; Lichtenberg et al., 2017; Lichtenberg et al., 2015). This study examines the cross-validation of the LFDRS Scale to assess its concurrent validity with a measure of executive functioning and suspected financial exploitation (FE).

METHODS

Ninety-five older adult community participants underwent an assessment session. The total LFDRS was significantly related to executive functioning.

RESULTS

Trail Making Test Part B was the only significant predictor of the LFDRS total score in a regression equation. An independent sample t-test showed that victims of FE scored higher on the LFDRS than those who were not victims.

CONCLUSIONS

These findings are consistent with the initial validation study of the LFDRS and the initial study on the intersection of decision-making and FE (Lichtenberg et al., 2017, 2020) and adds evidence supporting the LFDRS concurrent validity.

Mapping the knowledge domain of financial decision making: A scientometric and bibliometric study

Based on a 12-year bibliographic record collected from the Web of Science (Thomson Reuters) database, the present study aims to provide a macroscopic overview of the knowledge domain in financial decision making (FDM). A scientometric and bibliometric analysis was conducted on the literature published in the field from 2010 to 2021, using the CiteSpace software. The analysis focuses on the co-occurring categories, the geographic distributions, the vital references, the distribution of topics, as well as the research fronts and emerging trends of financial related decision making. The steady increase of papers published year by year demonstrated the increasing interest on this topic at the international level. The scientometric analysis of the literature showed that financial decision, investment decision, and financing decision stood out of the crowd of the research on FDM, suggesting their important role in FDM and its research. The results of citation burst analysis predicted the focus of topics, i.e., the impact of individual differences such as financial literacy, gender and age on FDM in the coming years. Different from the traditional approach of literature review, this bibliometric analysis offers a scientometric approach to reveal the status quo and the development trend of FDM by macro and quantitative means. In addition, future research directions for the field are recommended.

The Relationship Between Financial Decision-Making and Financial Exploitation in Older Black Adults

Objectives: This study examined the relationship between contextual measure of financial decision-making and the financial exploitation experiences of older Blacks, and the convergent validity of mental health measures of contextual decision-making items. Methods: This cross-sectional study of 104 older Black adults included 52 cases of confirmed financial exploitation. Participants were matched on age and gender. Bivariate and multivariate analyses were performed to examine these relationships. Results: The contextual measure of financial decision-making was significantly associated with financial exploitation, above and beyond the relationship of demographic measures. Further, there was strong evidence for convergent validity between the contextual measure and mental health measures. Discussion: Results underscore the significant relationship of the contextual factors involved in financial decision-making and financial exploitation. This study provides a conceptually driven approach to understanding the experiences of older Black adult victims of financial exploitation.

The WALLET Study: Examining early memory loss and personal finance

Background and Objectives

This feasibility study tests a new approach for assessing personal finance in older persons with early memory loss. The project examines 2 primary outcomes that gauge the financial viability and well-being of older adults: wealth loss and financial exploitation. The overall objective is to determine the association of financial literacy and management, financial decision-making, and cognition with wealth loss and financial exploitation.

Research Design and Methods

This cross-sectional study recruited 46 participants who were 60 years of age or older. Participants were classified as having mild cognitive impairment, perceived cognitive impairment, or no cognitive impairment. The study coordinator arranged with each participant to obtain copies of their main checking account statements for 12 consecutive months within the previous 2 years and, if appropriate, credit card statements. All statements were de-identified and assigned a random ID number. Participants then completed 2 telephone interviews.

Results

The average participant age was 72 years (standard deviation [SD] = 7.7); 84% were female, 39% White, and 35% currently married. Average education was 16.2 years (SD = 2.4); mean yearly household income was almost $42,000 (SD = 25,752); and monthly social security payments averaged $1,446 (SD = 1,244). Our results indicate that the methods used to analyze checking account statements, followed by telephone interviews to verify identified trends, were useful in developing a financial behavior index to measure wealth loss.

Discussion and Implications

We demonstrate an alternative method for assessing personal finance using person-centered principles, which we believe are critical in the presence of diminished or impaired cognition. Our findings offer an innovative method for assessing the risk for wealth loss and financial exploitation.

Financial Stressors and Resources Associated With Financial Exploitation

Background and Objectives

The prevalence of older adult financial exploitation (FE) is increasing. Population-based survey estimates of FE in the older adult population range from 5% to 11%. Given the growing prevalence of FE victimization in older adult populations, understanding the population's vulnerability to FE has increased in importance. This study investigates a conceptual framework in an attempt to understand how financial stressors and resources are associated with substantiated FE in a sample consisting largely of Black older adults.

Research Design and Methods

The study uses a cross-sectional design to investigate group differences among a total sample of 142 community-dwelling older adult participants, 62 of whom sought services to address FE and 80 with no history of FE.

Results

The group of older adults who sought services to address FE was more likely to be unmarried and had fewer years of education. Measures of financial literacy and perceived financial vulnerability had protective and risk effects, respectively.

Discussion and Implications

The present study found that sociodemographic and financial stress and resource measures have significant relationships with FE. These findings support the conceptual framework describing their relationship. This new conceptual framework provides a guiding factor in better understanding vulnerability to FE in older adults. The study also adds to the paucity of research completed on FE with Black older adults.

A Scoping Review and Conceptual Framework Examining the Role of Sleep Disturbance in Financial Exploitation in Older Adults

Sleep disturbances and financial exploitation have both been linked to impaired cognitive ability, loneliness, and depressed mood in older adults, suggesting a potential role of sleep disturbances in increasing vulnerability to financial exploitation. We sought to identify evidence linking sleep disturbances to financial exploitation. We conducted a systematic search of MEDLINE, PubMed Central, and National Center for Biotechnology Information Bookshelf for relevant published articles on sleep and financial exploitation. Three studies examining both sleep and financial exploitation were identified. None of the studies explored sleep disturbances as a cause of financial exploitation. More work needs to be done to examine the role of sleep disturbances in financial exploitation. We propose a conceptual framework for identifying possible associations among sleep disturbance, biopsychosocial, and decision-related situational factors to guide further exploration of relationships between sleep and financial exploitation.

The Impact of Financial Coaching on Older Adult Victims of Financial Exploitation: A Quasi-Experimental Research Study

The financial exploitation (FE) of older adults affects not only victims' finances, but also their health. This preliminary study investigated the impacts of a financial coaching program on the financial, neurocognitive, physical, and emotional health of older adult victims of FE. Twenty older adults residing in a large urban area who had experienced FE were compared at baseline and follow-up with a group of 20 older adult of the same area who were making important financial decisions, but had not experienced FE and did not receive the intervention. At baseline, both groups were similar on demographic variables, but participants who had experienced FE had more health problems, poorer memory and executive functioning, less social support, and greater stress than the comparison group. Six months after financial coaching ended, program participants had significantly less anxiety. Overall, older adult victims of FE showed no significant declines and, in fact, showed some improvement.

Context Matters: Financial, Psychological, and Relationship Insecurity Around Personal Finance Is Associated With Financial Exploitation

BACKGROUND AND OBJECTIVES

Context can influence or overwhelm the intellectual and cognitive aspects of financial decision making but has only recently received increased attention. The construct validity of conceptual subscales from a financial decision-making scale was examined in the context of their relationship to financial exploitation.

RESEARCH DESIGN AND METHODS

Two hundred forty-two community-based participants were recruited into the study. The final sample contained 242 participants. Measures included demographic variables, conceptually derived contextual items, and neurocognitive measures. Seventeen of the 34 contextual items investigated differentiated financially exploited and nonexploited older adults. Combining these 17 contextual items led to the creation of a new scale: the Financial Exploitation Vulnerability Scale (FEVS). Correlational analyses and area under the curve analyses were used to examine the relationship between this new scale of contextual items and other measures and to determine how clinically meaningful the scale was in the current sample.

RESULTS

Contextual items were powerful discriminators between those who were exploited and those who were not. The new scale of contextual items (the FEVS) demonstrated good internal consistency (Cronbach's alpha = 0.82) and a strong area under the curve (receiver operating characteristic = 0.80), thereby indicating good clinical significance and evidence for construct validity.

DISCUSSION AND IMPLICATIONS

We examined the conceptually derived subscales of financial awareness, psychological vulnerability, and relationship strain and how these relate to financial exploitation. Our major finding is that contextual items differentiated between exploited and nonexploited adults, which demonstrate the importance of measuring context in financial decision making and exploitation. A new scale for measuring contextual items was introduced.

The Role of Emotional vs. Cognitive Intelligence in Economic Decision-Making Amongst Older Adults

The links between emotions, bio-regulatory processes, and economic decision-making are well-established in the context of age-related changes in fluid, real-time, decision competency. The objective of the research reported here is to assess the relative contributions, interactions, and impacts of affective and cognitive intelligence in economic, value-based decision-making amongst older adults. Additionally, we explored this decision-making competency in the context of the neurobiology of aging by examining the neuroanatomical correlates of intelligence and decision-making in an aging cohort. Thirty-nine, healthy, community dwelling older adults were administered the Iowa Gambling Task (IGT), an ecologically valid laboratory measure of complex, economic decision-making; along with standardized, performance-based measures of cognitive and emotional intelligence (EI). A smaller subset of this group underwent structural brain scans from which thicknesses of the frontal, parietal, temporal, occipital, cingulate cortices and their sub-sections, were computed. Fluid (online processing) aspects of Perceptual Reasoning cognitive intelligence predicted superior choices on the IGT. However, older adults with higher overall emotional intelligence (EI) and higher Experiential EI area/sub-scores learned faster to make better choices on the IGT, even after controlling for cognitive intelligence and its area scores. Thickness of the left rostral anterior cingulate (associated with fluid affective, processing) mediated the relationship between age and Experiential EI. Thickness of the right transverse temporal gyrus moderated the rate of learning on the IGT. In conclusion, our data suggest that fluid processing, which involves "online," bottom-up, cognitive processing, predicts value-based decision-making amongst older adults, while crystallized intelligence, which relies on "offline" previously acquired knowledge, does not. However, only emotional intelligence, especially its fluid "online" aspects of affective processing predicts the rate of learning in situations of complex choice, especially when there is a paucity of cues/information available to guide decision-making. Age-related effects on these cognitive, affective and decision mechanisms may have neuroanatomical correlates, especially in regions that form a subset of the human mirror-neuron and mentalizing systems. While superior decision-making may be stereotypically associated with "smarter people" (i.e., higher cognitive intelligence), our data indicate that emotional intelligence has a significant role to play in the economic decisions of older adults.

Quantifying Risk of Financial Incapacity and Financial Exploitation in Community-dwelling Older Adults: Utility of a Scoring System for the Lichtenberg Financial Decision-making Rating Scale

Objectives: This work examines the clinical utility of the scoring system for the Lichtenberg Financial Decision-making Rating Scale (LFDRS) and its usefulness for decision making capacity and financial exploitation. Objective 1 was to examine the clinical utility of a person centered, empirically supported, financial decision making scale. Objective 2 was to determine whether the risk-scoring system created for this rating scale is sufficiently accurate for the use of cutoff scores in cases of decisional capacity and cases of suspected financial exploitation. Objective 3 was to examine whether cognitive decline and decisional impairment predicted suspected financial exploitation.Methods: Two hundred independently living, non-demented community-dwelling older adults comprised the sample. Participants completed the rating scale and other cognitive measures.Results: Receiver operating characteristic curves were in the good to excellent range for decisional capacity scoring, and in the fair to good range for financial exploitation.Conclusions: Analyses supported the conceptual link between decision making deficits and risk for exploitation, and supported the use of the risk-scoring system in a community-based population.Clinical Implications: This study adds to the empirical evidence supporting the use of the rating scale as a clinical tool assessing risk for financial decisional impairment and/or financial exploitation.

A Short Form of the Lichtenberg Financial Decision Rating Scale

Objectives: This article examines the convergent validity and clinical utility of the 34-item short form of the Lichtenberg Financial Decision Rating Scale (LFDRS-SF). A briefer scale can lead to enhanced and efficient use of a person-centered approach to the assessment of financial decision-making.Methods: Using data on 200 community-dwelling older adults from Lichtenberg and colleagues (2017a), convergent validity was examined with cognitive and financial management measures using a correlational and regression approach. Receiver operating curve analyses for predicting decision-making ability classification and suspected financial exploitation classification were used to evaluate clinical utility.Results: The LFDRS-SF total risk score was significantly correlated with both cognitive and financial management measures, and the regression analysis predicted 9% of the LFDRS-SF measure. These results demonstrate not only convergent validity, but also the conceptual and empirical uniqueness of financial decision-making.Conclusions: The LFDRS-SF is a valid tool to assess real-world financial decision-making abilities.Clinical Implications: The LFDRS-SF offers an efficient way to assess financial decision-making. Training on the tool and automatic scoring and recommendations for next steps can be found at https://olderadultnestegg.com.

A generic brain connectome map linked to different types of everyday decision-making in old age

Making reasonable decisions related to financial and health scenarios is a crucial capacity that can be difficult for older adults to maintain as they age, yet few studies examine neurocognitive factors that are generalizable to different types of everyday decision-making capacity. Here we propose an innovative approach, based on individual risk-taking preference, to identify neural profiles that may help predict older adults' everyday decision-making capacity. Using performance and cognitive arousal information from two gambling tasks, we identified three decision-making preference groups: ambiguity problem-solvers (A), risk-seekers (R), and a control group without strong risk-taking preferences (C). Comparisons of the number of connections within white matter tracts between A vs. C and R vs. C groups resulted in features consistent with the theory of dual neural functional systems involved in decision-making. Unique tracts from the A vs. C contrast were primarily centered in dorsal frontal regions/reflective system; unique tracts from the R vs. C contrast were centered in the ventral frontal regions/impulsive system; and shared tracts from both contrasts were centered in the basal ganglia, coordinating the switch between the two types of decision-making preference. Number of connections from the tracts differentiating A vs. C significantly predicted financial and health/safety decision-making capacity, and the association remained significant after controlling for multiple socioeconomic and cognitive factors. The connectome identified may provide insight into a generic white matter mechanism related to everyday decision-making capacity in older age.

Enduring Powers of Attorney and Financial Exploitation of Older People: A Conceptual Analysis and Strategies for Prevention

Enduring powers of attorney (POAs) are commonly used legal instruments that enable older people to plan for asset management in the event of future incapacity. The policy objective of POAs - empowering control over money and property - are frustrated when POAs are misused to financially exploit older people. This commentary integrates theory and evidence to propose a conceptual framework for POA-facilitated financial exploitation (POA-FE). Identified risk factors include inadequate knowledge about the POA role; family conflicts; attitudes of entitlement; and lack of planning and preparation for financial decision-making. POA-FE occurs on a continuum of behavior and strategies for preventing POA-FE are suggested using strengths-based approaches for older people and their attorneys.

Providing Assistance for Older Adult Financial Exploitation Victims: Implications for Clinical Gerontologists

Background and Objective: Despite the growth of financial exploitation research in the past decade, almost none has focused on older urban adults, and especially urban African Americans. The Success After Financial Exploitation (SAFE) program provides individual financial coaching to older urban adults. Methods: We use community education, delivered separately to older adults and to the professionals who serve them, to raise awareness about financial exploitation (FE) and to motivate referrals for financial coaching. This paper describes the program and methodology, and uses case examples and preliminary research to investigate the intersection of FE and physical and mental health functioning. Results: SAFE participants were able to repair their credit scores, reduce new financial burdens, and even recover monies they had lost due to FE. Case examples illustrate how financial scams and identity theft impacts urban older adults. Participants were assessed prior to the provision of services, and SAFE participants performed poorer on executive functioning tasks than participants in the control group. They also reported more physical health problems and anxiety and depressive symptoms. SAFE participants also had significantly higher risk scores on a financial decision-making scale. Conclusion: Study findings advance our understanding of the impacts of FE on cognitive functioning, mental health, and financial decision-making. Clinical Implications: Clinicians need to be more attuned to the financial health of their older clients, who, if they are struggling with financial exploitation, may also be suffering from problems with cognitive functioning and physical and mental health.