Financial intelligence peaks at 53
This study, published at the National Bureau of Economic Research, has been written about in several news accounts. It just crossed my desk.The sophistication of financial decisions varies with age: middle-aged adults borrow at lower interest rates and pay fewer fees compared to both younger and older adults. We document this pattern in ten financial markets... The sophistication of financial choices peaks around age 53 in our cross-sectional data.Performance tends to rise and then fall with age. Baseball players peak in their late 20s (James 2003). Mathematicians, theoretical physicists and lyric poets make their most important contributions around age 30 (Simonton 1988). Chess players achieve their highest rankng in their mid-30s (Charness and Bosnian 1990). Autocratic rulers are maximally effective in their early 40s (Simonton 1988). Authors write their most influential novels around age 50 (Simonton 1988). The present paper studies an activity that is less august, though it is relevant to the entire adult population: personal financial decision making.
Comments
While I agree with the premise of this conclusion, one thing jumps out at me from the first paragraph: was the interest rate/fee study controlled for credit rating? It would seem to me that, in general, middle-aged adults would have better credit--solid payment history, earnings potential, saving--than especially younger adults and also older adults. Additionally, rather than this simply being a financial intelligence issue, wouldn't this also be a generational issue? Shouldn't people nearing retirement and facing major changes to their financial situations inherently be more versed in financial decision making?
Posted by: Mitch | July 5, 2007 8:45 PM