In the United States, millions of elderly people are facing a serious problem: cognitive decline has severely affected their financial management skills, yet 75% of them still manage their finances on their own.

According to a new study published in JAMA Network Open, the decline in cognitive ability can lead to overconfidence, memory problems and decision-making deficiencies, all of which are highly likely to translate into risks in financial management. Dr. Jing Li, an assistant professor of health economics at the University of Washington School of Pharmacy and the author of the study, told Health magazine: "If elderly people with cognitive decline continue to manage family finances, they may face a high risk of making financial mistakes, and these mistakes may lead to extremely serious consequences, such as missing bill payments, making high-risk investment choices and suffering from financial exploitation."

For those who have elderly relatives at home, it is natural to be worried. Next, let's take a detailed look at the results of this study and the measures that can be taken to deal with these challenges.

To deeply explore the potential connection between cognitive decline and financial management skills, the researchers analyzed the data of the 2018 Health and Retirement Study, which is a nationally representative survey of American adults aged 50 and above. The researchers focused on nearly 8,800 men and women aged 65 and above, and these people also had data on memory and thinking state.

Among the subjects participating in the study, about 80% did not show detectable cognitive impairment. However, nearly 6% had dementia, and about 14% had cognitive impairment no dementia (CIND), that is, someone's memory and thinking ability had a slight (but obvious) decline, but it had not reached the level of dementia. When this proportion was applied to the general population level, the researchers found that the part of people with CIND accounted for about 7.4 million Americans.

In terms of financial situation, most of the respondents said that they still managed their finances, and 40% of them lived alone. Among those who claimed to still manage family finances, 57% of the respondents with dementia and 15% of those with CIND said that it was difficult to manage their own money. In addition, about one-third of the patients with dementia or CIND said that they owned a large number of "risk assets" such as stocks or loans. Many of these assets were quite large. The median value of stocks held by patients with dementia was $215,000, while that of patients with CIND was $125,000.

This study is "part of a larger research project, and its motivation comes from the experiences of family members who learned that their relatives had dementia due to catastrophic financial losses", Dr. Lauren Nicholas, a health economist at the Colorado School of Public Health and a co-author of the study, told Health magazine.

Dr. Nicholas pointed out that financial management difficulties "are often one of the earliest signs of cognitive impairment, which means that the elderly may not even realize that they have problems themselves". But she also emphasized that in the process of daily financial management, "it is highly likely" to make "costly and irreversible mistakes" such as forgetting to pay bills, being deceived or making wrong investment decisions.

Dr. Nicholas also added that this "will bring the risk of running out of funds, because there is usually no opportunity to return to work in old age", especially for people with cognitive decline. "This will also bring financial risks to other members of the patient's family. They may lose the money they rely on or have to make up the shortfall."

Dr. Scott Kaiser, a geriatrician and the director of geriatric cognitive health at the Pacific Neuroscience Institute of Providence Saint John's Health Center in Santa Monica, California, told Health magazine that the results of this study "are worrying, especially in the context of an aging population". According to the data of the U.S. Census Bureau in 2019, 54.1 million Americans are aged 65 and above, and it is expected that by 2034, the elderly population will exceed the child population for the first time in American history.

Amy Goyer, a national family and care expert of the American Association of Retired Persons (AARP), told Health magazine that in view of the risks brought by cognitive decline in managing family income, financial planning is extremely important. She mentioned: "It is always a good idea to cooperate with professionals, such as accountants or financial planners, who can help make decisions." Goyer also pointed out that before a person has cognitive decline, it is crucial to appoint a financial power of attorney (a person who makes financial decisions for you). In this way, once the mental state declines, there will be safeguard measures.

"Preventing fraud and deception is also important, because some people with cognitive decline may be very vulnerable to fraud." Goyer said, "Setting up alarms and notifications so that family caregivers can know whether there is abnormal activity in the account will be very helpful." She also said that you can help your relatives register for the "Do Not Call" registry to help resist telemarketing. The AARP has prepared a financial workbook for family caregivers, which provides detailed instructions on how to help manage the finances of relatives.

Dr. Kaiser said that early screening for cognitive impairment (usually carried out by primary care physicians) is also very important. Dr. Li also pointed out that this helps with planning, because "early detection of cognitive impairment is conducive to carrying out financial planning before the condition deteriorates into dementia".

Although it is not easy for anyone to entrust their money to others, Dr. Nicholas emphasized that formulating a comprehensive plan is of great significance. She said: "The value of appointing a financial attorney-in-fact may actually reach thousands or even millions of dollars, because for those elderly people who willingly hand over their assets to those who deceive them or stop paying rent, mortgage or taxes, there are almost no protection measures - even if these mistakes are caused by cognitive impairment."

Goyer agreed with this. She said: "It is best to be prepared and establish a financial power of attorney when a person is clear-headed and has the capacity. In this way, if/when needed, the financial representative will be ready and able to provide help."