12.11.2019 in Critical
How Does Aging Affect Financial Decision Making?

A decision-making process is a complex process which depends on cognitive and financial aspects. Financial decisions as well as routine decisions that people make every day also depend on a complex financial-cognitive process. However, the result of financial decisions is also much influenced by age. For instance, young people are more likely to make their decisions basing on their emotions. Adults make decisions more wisely and they estimate the necessity of a financial decision according to the contribution that it may give. In other words, adults are less willing to waste their money on doubting spending. Elder people are more sparing; their decisions do not always reflect the necessity or desire, but some other factors. One should take into account that, as a rule, elder people have more spending on medical help and medicine. According to this fact, their priorities are slightly different from preferences of younger generations. 

In order to estimate how aging affects a financial decision making process, one has to provide a research using statistical and empirical data. This research will help to identify what factors are crucial for making financial decisions and how these factors change within aging.


Decision Making Process 

As it was mentioned above, a decision-making process is the result of emotional and cognitive reaction. However, emotional reaction is faster; hence, people are more willing to make decisions basing on their emotions. For instance, children, who do no learn yet how to differentiate the necessity from a desire, make their decisions according to the financial need. Adults make their decisions more rationally; they also take into consideration possible risks and possible negative outcomes. As a result, if possible benefits overcome threats or risks, a person makes a decision. However, one should notice that a decision-making process does not always depend on age. Some adults also make decisions basing solely on their desire, but not rational thinking. Hence, when one says that adults make more rational decisions, it is necessary to point that it is the general statistic, but not a common phenomenon. 

Besides the rational and emotional background, there is also a current mood state of a person. A mood state may play a crucial role in a decision-making process even if a person used to make a different decision in the similar situation. Positive and negative mood may have a different outcome on a decision-making process. For instance, people with positive mood have more chances to make a risky decision. They are more optimistic and thus, they do not view potential risks as a serious problem. On the other hand, people with bad mood have more chances not to make a decision even if a potential risk is very low. People with negative emotions view a decision itself as a negative process. Consequently, they are more willing not to make a decision at all, especially if it financial. 

As one can see, a decision-making process is a complex phenomenon which depends first of all on financial and a rational cognitive thinking balance. If one of these factors outweighs another, a person makes a positive or negative decision. The point is that within the age the balance between rational thinking and emotional thinking changes and thus, elder people make decisions which are different from the ones that they made when they were young. 

The Effect of Aging

In order to estimate the effect of aging on a decision-making process, there was conducted a research. This research demonstrates that elder people at the age of 65 and older have higher level of satisfaction than people who are in their mid-30s or mid-40s. Elderly’s level of satisfaction is comparable to the one of young people in their 20s. The declining of level of satisfaction among elderly people is seen in very old age. This phenomenon could be explained from the medical point of view. People who are very old experience more problems with health and thus, their general level of satisfaction a priory cannot be high due to constant pain or other symptoms which make them feel bad. Hence, the emotional apprising lasts during the age of 65 till 80 years old. After 80 years the life satisfaction begins declining, and older people start experiencing more negative emotions than positive. 

The increasing of life satisfaction in elder age leads to the stimulation of attention, memory and preferences. Older people view life in a more positive light and filter all information according to this criterion. In other words, older people are more willing to notice positive information than neutral. Hence, advertisement has bigger influence on the elderly people and, as a result, they are more tangible to doubtful offers of TV markets. Advertising designers use this specific to create an advertisement which will attract the attention of elderly people. In addition, elderly people are more willing to buy lottery tickets than other social groups. 

Elderly have the disproportion reaction on information they receive. They view positive information with good emotions and try to ignore possible negative outcomes. Moreover, there are some factors that one may use to influence elderly’s mood. For instance, elderly people demonstrate the high mood after they recall some events from their life, especially if the listener shows his/her interest in these memories. 

The researchers provided an experiment in order to demonstrate the difference of perception among elderly and middle-aged people. Both groups were shown pictures that were divided into neutral, positive and negative. Both groups paid special attention to the pictures that awoke some emotions inside of their consciousness, negative or positive. However, elderly were more concentrated and remembered pictures that caused positive emotions, while middle-aged group gave preferences to the pictures with negative emotions. This experiment proves that elderly people are more interested in positive emotions and thus, they are too vulnerable to bright advertisements. 

According to this fact, a financial decision-making process among elderly is based on the emotional background rather than rational or logical estimation. Elderly view potential risks not as critical as the middle-aged people do. As it was mentioned above, their general level of satisfaction is comparable to young people in their 20s. Hence, their decisions might be hasty, irrational, not well-thinking and risky. Elderly do not take into consideration long term consequences or the possibility of a negative outcome. They see the world in a better light and thus, they believe that everything they do should also be provided from this perspective. Hence, a financial decision-making process among elderly is viewed as irrational and risky. They are more willing to make purchases which have doubtful advantages; besides, they are more sensitive to different special offers and advertisements. 

However, there is another side of the medal, and one can see that elderly people make such financial decisions as saving money and avoiding buying expensive products, clothes and other things and stuff. The reason is their age; with the age, most people realize that they do not need any expensive clothes. Moreover, they start saving money on food, buying cheaper foodstuff. Instead, elderly people try to win some lotteries and buy a car, a house, or simply to go travelling. In other words, in their age, they try to get what they always wanted or lacked when they were young.  


From my own perspective, aging and a financial decision-making process are bided with close relation. A decision-making process, including financial decisions, depends much on the emotional background and the ability to estimate potential risks and benefits. Elderly people are those who have already lived a long life and thus, they do not want to spend time that they have on negative emotions, they want to live their lives freely. Elderly people have faced everything that adults are facing at the present moment or will face in the future. The worst episodes of their lives have ended, and now they have some more time to spend, living a life full of satisfaction. Elderly people do not have problems; except those with their health state. They do not have to worry about the bills and credits or spare money for children’s college. They have already done it all, and now they deserve to relax and receive pleasure from their life.

Elderly are people who perceive the world differently; this is the main explanation why they make decisions which may seem irrational to others. I may even make a suggestion that elderly are even more risk-takers than anybody else. They are ready to buy a lottery ticket every weekend since they truly believe that one day they will surely win. I think that they realize that some of their actions are not logical and are the result of the emotional apprising. However, I think this is why they act in a different way. For instance, if an elderly wins a lottery, he/she will become a millionaire, but if he/she does not, he/she will lose only 10 dollars spent on a ticket. Thus, it can be said that aging has an impact on financial decision-making process, but the core reason is probably not the gaining, but the changing in the world’s perception by elderly people. 

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