How to Protect An Aging Mind From Financial Fraud
Although aging is inevitable, financial fraud in old age isn’t. Elderly individuals in the US alone lose an estimated 3 billion dollars a year to financial scams. Our research offers insights into how we can prevent this troubling reality.
The simple use of the language ‘grandma scam’ or ‘grandparent scam’ attests to the fact that elder financial abuse has become normalized, even unsurprising, in our increasingly digital world.
Older populations are not more susceptible to financial fraud simply because of naivité or their limited technological literacy. More accurately, older populations are victims of cognitive decline far before they are victims of financial scams.
Financial decisions are already some of the most stressful we make. These complex decisions become increasingly difficult to navigate as we age. Our research team wanted to understand: why do older adults tend to be more susceptible to fraudulent situations and how can we prevent this phenomenon?
References
Best, R., & Charness, N. (2015). Age differences in the effect of framing on risky choice: A meta-analysis. Psychology and Aging, 30(3), 688–698. https://doi.org/10.1037/a0039447
Denburg, N. L., Tranel, D., & Bechara, A. (2005). The ability to decide advantageously declines prematurely in some normal older persons. Neuropsychologia, 43(7), 1099–1106. https://doi.org/10.1016/j.neuropsychologia.2004.09.012
Grable, J. E., McGill, S., & Britt, S. (2011). Risk Tolerance Estimation Bias: The Age Effect. Journal of Business & Economics Research (JBER), 7(7). https://doi.org/10.19030/jber.v7i7.2308
Kannadhasan, M. (2015). Retail investors’ financial risk tolerance and their risk-taking behaviour: The role of demographics as differentiating and classifying factors. IIMB Management Review, 27(3), 175–184. https://doi.org/10.1016/j.iimb.2015.06.004
Perez, A. M., Spence, J. S., Kiel, L. D., Venza, E. E., & Chapman, S. B. (2018). Influential Cognitive Processes on Framing Biases in Aging. Frontiers in Psychology, 9, 661. https://doi.org/10.3389/fpsyg.2018.00661
Reed, A. E., & Carstensen, L. L. (2012). The Theory Behind the Age-Related Positivity Effect. Frontiers in Psychology, 3. https://doi.org/10.3389/fpsyg.2012.00339
Roalf, D. R., Mitchell, S. H., Harbaugh, W. T., & Janowsky, J. S. (2012). Risk, Reward, and Economic Decision Making in Aging. The Journals of Gerontology: Series B, 67B(3), 289–298. https://doi.org/10.1093/geronb/gbr099
Sumit Agarwal, John C. Driscoll, Xavier Gabaix, & David Laibson. (2009). The Age of Reason: Financial Decisions over the Life Cycle and Implications for Regulation. Brookings Papers on Economic Activity, 2009(2), 51–117. https://doi.org/10.1353/eca.0.0067
Weller, J. A., Levin, I. P., & Denburg, N. L. (2011). Trajectory of risky decision making for potential gains and losses from ages 5 to 85. Journal of Behavioral Decision Making, 24(4), 331–344. https://doi.org/10.1002/bdm.690
About the Author
Jayden Rae
Jayden has a particular interest in studying how public policy can be used as a tool to help individuals and organizations make decisions to protect the environment. She has previously worked in the domain of environmental policy at the Ontario Ministry of the Environment. She is a founding director of the environmental non-profit Climatable, which focuses on engaging Canadians in climate change action. Jayden received her bachelor’s degree from McGill University in environment and political science.
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