Dementia in Older Adults Impairs Self-Assessment of Financial Skills, Increasing Fraud Vulnerability

Research indicates that older adults diagnosed with dementia often lose their ability to accurately evaluate their own financial skills. A recent longitudinal study published in The Gerontologist analyzed data from over 2,000 seniors aged 65 and older across a decade, revealing that while their performance in managing everyday financial tasks declines with age, those without dementia remain fairly aware of their capabilities—and this awareness even improves over time. Conversely, individuals with dementia and severe cognitive decline tend to misjudge their financial competence, a phenomenon known as financial anosognosia.

The study utilized assessments of everyday tasks involving calculations related to costs, discounts, tax forms, and medical expenses, alongside participants' self-ratings of their financial proficiency. Notably, nearly all participants without dementia or with mild cognitive impairment accurately perceived their abilities, but those diagnosed with dementia often lacked insight into their deficits.

This disconnection from reality in understanding one's cognitive capacity significantly raises the risk of financial exploitation and scams, especially as aging naturally diminishes financial management skills. The decline, coupled with the absence of awareness, can leave vulnerable seniors open to fraud. Currently, few effective tools exist to support families in safeguarding their loved ones’ finances while respecting their autonomy.

The study emphasizes a critical window early in cognitive decline when individuals may still be aware of their limitations, offering an opportunity for preemptive protective measures. As many seniors increasingly rely on online banking, which can either aid or hinder awareness of financial competence, further research is necessary to explore online financial management and scam prevention among older adults. Balancing the need for safety with respect for independence remains a complex challenge that demands ongoing attention.

Understanding how to best support cognitively impaired seniors without compromising their dignity is vital as the population ages and dementia cases rise. More research is needed to develop practical solutions that help older adults manage their finances safely while preserving their autonomy.