Is Declining Financial Literacy an Indicator of Impending Dementia?

People with dementia often have problems managing their money. In fact, money problems may be one of the first noticeable signs of the disease.

A few years ago, Angie O’Leary, head of wealth services at RBC financial, noticed that her father-in-law’s household bills and financial statements were scattered around the house. “There were envelopes with checks in them that weren’t sent. Some with stamps, and some without,” said O’Leary. “That was the first sign something was not right.” This prompted her family to get him checked out to find out he was in the early stages of dementia. “It took a year to get all of finances sorted out,” O’Leary noted.

Similar to O’Leary’s situation, if you have a loved one who ishaving trouble managing his or her finances, research has shown it can be an early sign of cognitive difficulty and even dementia. Signs of money problems may include trouble counting change, paying for a purchase, calculating a tip, balancing a checkbook, or understanding a bill or bank statement. The person may be afraid or worried when he or she talks about money. You may also find:

Unpaid and unopened bills;
Lots of new purchases on a credit card bill;
Strange new merchandise; and/or
Money missing from the person’s bank account,


The Scientific Link Between Trouble with Financial Tasks and Dementia

Having trouble with money is not always dementia, however. As people age, they generally become slower at balancing their checkbooks and counting correct change, even when they’re cognitively healthy. Studies show, though, that trouble with simple financial tasks may be correlated to the amount of protein deposits including beta-amyloid plaques in the brain. The link between Alzheimer’s and financial literacy is published in the The Journal of Prevention of Alzheimer’s Disease. It would be wise to consult your physician if you suspect a loved one is having problems with financial tasks.

It’s Important to Your Mental Health to Stay Financially Literate

Two recent studies suggest how important it can be to your mental health and your wallet, and to possibly help with staving off dementia, to keep up your financial literacy and your confidence about it as you get older.

In one study, titled “Adverse Impacts of Declining Financial and Health Literacy in Old Age,” Rush University Medical Center professors Lei Yu and Patricia Boyle reviewed data from 1,000 people with an average age of about 80. The group was racially and socioeconomically diverse, and resided in retirement communities and subsidized housing facilities in the Chicago metropolitan area.

The researchers looked at the participants’ annual financial and health literacy assessments for up to 10 years.

In a sister study, titled “Confidence in Financial Literacy and Cognitive Health in Older Persons,” the same researchers discovered that it’s not just how much you know about managing money, it’s how confident you feel about it. The study’s participants were free of dementia at their first literacy assessment and were followed annually. During the follow-ups, 18% of the group developed Alzheimer’s dementia.

These were some of the findings from both Rush University studies:

Declining financial health literacy predicts several aspects of a person’s life including decision making, well-being, scam susceptibility and cognitive health;
Financial confidence (as well as literacy) was associated with a lower risk of Alzheimer’s;
Literacy levels declined in general over time, and only a small proportion of participants (17%) were able to maintain their literacy level. Those with a faster decline in financial and health literacy were more susceptible to scams and poorer decision making.
While 78% of participants rated their confidence in financial literacy comparable to what the researchers predicted based on their actual knowledge, 9% were overconfident and 13% were underconfident. The underconfident ones had a higher risk of developing Alzheimer’s and faster cognitive decline.
Declining financial literacy could be a harbinger of financial outcomes. So, monitoring it could be a way of noting potential problems.
It would help if older adults received — and continued to receive — financial education as they age.

The researchers’ conclusion: “Efforts to mitigate declining financial and health literacy may promote independence and well-being in old age.”

Resources to Help You Keep Up Your Financial Literacy and Confidence Throughout Your Lifetime

“Literacy is a skill we know can be increased across the lifespan,” noted one of the researchers, Patricia Boyle. She said: “People should continuously try to increase their own knowledge. Things change in the financial world and you need to keep pace with them.”

Here are some resources to help you stay financially literate as you age:

U.S. Security and Exchange Commission (SEC) offers free financial literacy tools at
FINRA offers a resource to help you feel more confident about participating in financial markets.
FDIC’s Financial Tips for Seniors: The Federal Deposit Insurance Corporation’s 15 tips for protecting your finances, how to steer clear of scams, and more financial topics for seniors.
Money Smart for Older Adults: Money Smart for Older Adults was developed jointly by the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau. The curriculum consists of an Instructor Guide, PowerPoint slides, and a take-home resource guide.
CFPB’s Tools for Financial Security in Later Life: Use these resources to help older adults and their caregivers navigate some of the important decisions that can affect later-life financial security.
Efficient Financial Planning Tips for Senior Citizens: Here are a few senior citizen financial planning options for you to explore.
The Ultimate Guide to Senior Finance: Fiscal fitness topics, tips, and helpful resources for those over 50.
Top 10 Financial Scams Targeting Seniors: Financial scams targeting seniors have become so prevalent that they’re now considered “the crime of the 21st century.” Review the National Council on Aging’s (NCOA) list, so you can identify a potential scam.
AARP Foundation Finances 50+: AARP Foundation Finances 50+ covers the basics of finances, including: goal setting and budget planning; debt reduction and credit repair; asset building and protection. All materials are available for download free of charge.


The more knowledgeable you and your parents are about money matters, the greater the chance of being confident about financial literacy. “Everybody has the potential to increase their confidence,” said Boyle.

Contact Us for Your Financial Planning Needs

Besides being a Certified Elder Law Attorney, I am also an experienced retirement planning advisor and long-term care financial advisor through my financial services company, Lifecare Financial Services, LLC, which has been in business since 2006. Lifecare Financial Services works often in connection with other top retirement and long-term care financial advisors around the country. As a Certified Elder Law Attorney and Retirement Planner, one of my primary goals is to help you secure your financial future and well-being. Contact us today for all of your financial planning needs!

People with Dementia and Their Families Should Plan for the Future As Soon As Possible

People with dementia and their families face special legal and financial needs. At the Farr Law Firm, we are dedicated to easing the financial and emotional burden on those with dementia and their loved ones. We help protect the family’s hard-earned assets while maintaining your loved one’s comfort, dignity, and quality of life by ensuring eligibility for critical government benefits. If someone in your family has been diagnosed with dementia, please call us as soon as possible to make an appointment for an initial consultation:

Elder Law Attorney Fairfax: 703-691-1888
Elder Law Attorney Fredericksburg: 540-479-1435
Elder Law Attorney Rockville: 301-519-8041
Elder Law Attorney DC: 202-587-2797

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.

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