Older adults care about strangers’ welfare more in financial decision-making

A fascinating study has found that when it comes to making financial decisions that involve risk, older adults will regard the financial outcomes of others’ as their own and make choices that they would have selected for themselves.
 
What the researchers say: “Citizens in approximately one third of the countries around the world rely heavily on decisions made by older adults who may be government, business or community leaders. It’s important to not only understand how these older people make decisions for themselves, but also how they make decisions on behalf of others, as their decisions can lead to significant gains or losses,” said the research team leader. The findings were reported in the journal Psychology and Aging in September 2018.
 
Most of us need to make financial choices for ourselves, and often, on behalf of others. Studies have shown that younger adults take more risks when making financial decisions for others. However, there is a lack of understanding about the decision-making behavior of the elderly.
 
To address this knowledge gap the researchers conducted studies to compare how younger and older adults make financial decisions, both for themselves and for others.
 
The study was conducted from 2016 and 2017 and involved 191 participants. Among them, 93 were older adults with an average age of 70, while 98 were young adults averaging 23 years old. The participants were asked to complete a series of computerized decision-making tests in which they were assessed based on the choices they made under conditions of uncertainty. The research team used computational modelling to analyze two aspects of the participants’ financial decision-making: loss aversion, which is a tendency to weight potential losses more strongly than potential gains and risk-aversion asymmetry, which looks at the tendency to be risk-averse for potential gains and risk-seeking for potential losses.
 
The results show that when younger adults are making financial decisions on behalf of others, they take more risks even when the decisions put the person they are acting for at a disadvantage. Seniors make similar choices for themselves and when they act for others. This suggests that older adults care more about strangers’ welfare than younger people.
 
“Our results demonstrate that decision-makers of different age groups have different motivational goals. The young adults may treat the finances of others’differently from their own, perhaps regarding them as being less important. On the other hand, the older generation may care more about social harmony and emotional experience, and have less emphasis on material gains,” explained the lead author.
 
For instance, a young boss may choose one insurance plan for his employees and another plan for himself. The plan that he picks for others may be more risky and potentially disadvantageous compared to the plan he chooses for himself. On the other hand, an older boss is likely to select the same plan for his staff and himself. The findings of this study resonate with our earlier research which showed older adults are more generous towards strangers.”
 
So,what? A Harvard study a few years ago showed that male CEO's under 45 were more concerned with their own careers than with the fate of the companies they ran. This study seems to back that up. Other studies reported in TR confirm the generosity to others/over 45 link in men (over 35 for women). Of course not all elderly people are either wise or generous—many, like the narcissist-in-chief in the White House definitely are not.
 
However, for you and me the lessons here seem to be:

• Don’t hire a young financial advisor.
• Don’t work for a youthful CEO.
• And you probably do know better what’s good for you than your teenage son or daughter does.

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