Achieving financial independence and peace of mind depends largely on the quality of the financial decisions we make—and those decisions are strongly influenced by our level of financial literacy. Building on Financial Literacy Part 1, this article explores how financial literacy evolves as we age and how it interacts with financial confidence.
We’ll look at why financial literacy often improves through midlife but may decline later on, how confidence does (or doesn’t) change alongside it, and what that gap can mean for financial decision-making. We also discuss practical steps older adults can take to safeguard their finances and ways individuals and families can strengthen financial literacy at every stage of life.
In our first edition on financial literacy, we discussed the sobering reality that roughly 50% of American adults have low financial literacy—a factor that often leads to suboptimal financial behaviors and, ultimately, poorer financial outcomes.
The encouraging news is that financial literacy generally increases during adulthood. From approximately age 20 through age 60, many adults experience steady improvement as they learn through hands-on experience, trial and error, and more formal means such as using financial tools, reading, or working with a financial advisor.
Unfortunately, research shows that financial literacy tends to decline after age 60. One study found a steady, linear decline in financial literacy beginning at that age (Finke, Howe, & Huston, 2017). Another longitudinal study that tracked the same individuals over 12 years also identified declines in both financial and health literacy (Boyle et al., 2025). As study co-author and Wharton economics professor Olivia Mitchell explains:
“The decline in financial and health literacy scores among older adults would have negative consequences for their ability to make important decisions about spending, insurance, medical care, and potentially to avoid financial as well as health care scams.”
The Confidence Gap
Confidence is the feeling of self-assurance that arises from recognizing one’s abilities. Financial confidence, more specifically, reflects how confident we feel about our knowledge and skills related to financial planning and investing.
When high financial literacy is matched with high financial confidence, individuals are more likely to make sound decisions that translate into positive financial behaviors and outcomes.
However, for many older adults, a decline in financial literacy is not accompanied by a corresponding decline in confidence.
This growing gap between actual financial capability and perceived capability can increase the risk of financial mismanagement. Examples include ill-advised investment decisions or impulsive spending. Adults over age 60 are also particularly vulnerable to fraud. According to the FBI’s Internet Crime Complaint Center, elder fraud losses totaled approximately $3.4 billion in the U.S. in 2023—an 11% increase over the prior year. More than one-third of these losses were related to investment scams.
Beyond declining financial literacy, older adults may be more susceptible to scams due to factors such as cognitive decline, increased social isolation, a tendency toward trust and politeness, and technology gaps relative to younger generations. Additionally, because the Baby Boomer generation (currently aged roughly 62 to 80) is the wealthiest generation in the U.S., older adults are more frequently targeted by scammers.
Financial Protection as We Age
So how can older adults protect themselves from cognitive decline in general—and declining financial literacy in particular? While no single step provides complete protection, the following strategies can significantly reduce risk and increase peace of mind:
Automate Finances
Set up automatic deposits for recurring income sources, such as Social Security, and automatic payments for recurring expenses like rent, mortgages, and utilities.
Simplify Accounts
Consolidating bank and investment accounts can make financial management easier, clearer, and less time-consuming.
Establish Legal Safeguards
Key documents such as a revocable living trust and a durable power of attorney designate a trusted individual to manage finances if you become unable to do so.
Monitor Accounts Regularly
Review bank, investment, and credit card statements—ideally at least monthly—to identify unfamiliar or suspicious transactions early.
Be Wary of Fraud
Scams targeting older adults are increasing. Take your time and never share sensitive information—such as account numbers, dates of birth, or Social Security numbers—over the phone or online.
Seek Trusted Counsel
A trusted financial advisor can help identify unusual activity and provide an extra layer of oversight. If something doesn’t seem right, reach out immediately.
Plan Ahead
The most effective time to prepare for potential cognitive or financial decline is before it occurs. Early planning allows for thoughtful, proactive decisions.
Use Reliable Information Sources
Helpful resources are available for those planning ahead. One excellent example is Schwab’s senior investor protection site:
www.schwab.com/schwabsafe/protecting-senior-investors
Teaching Yourself—and Your Family—Financial Literacy
As we’ve seen, low financial literacy often leads to poor financial outcomes, while higher financial literacy is associated with stronger financial health across many measures. The good news is that financial literacy can be improved at any age.
Here are several practical steps to strengthen your own financial knowledge—and to help others do the same:
Start with a Financial Plan
A comprehensive financial plan provides a foundation for more thoughtful decision-making around cash flow, debt, savings, and investments. The planning process itself promotes hands-on learning in areas such as budgeting, investing, tax strategies, and risk management.
Establish Simple Systems
Tools like budgets and cash-flow tracking systems help increase financial awareness. Applications such as Quicken can serve as both management and learning tools. Automated savings vehicles—like 401(k) plans—also teach the power of consistency, compounding, and investment choice.
Use Credible Financial Resources
The Consumer Financial Protection Bureau (CFPB) offers free, high-quality educational resources on topics such as credit reports, auto loans, student loans, and mortgages. Another widely respected source of financial education is Investopedia.
Dive Deep When the Stakes Are High
It’s especially important to increase your knowledge in areas with significant financial impact—particularly decisions you don’t make often. Mortgages, for example, are typically the largest debt consumers take on, and a deeper understanding can materially improve outcomes.
Work with a Financial Advisor
A trusted advisor can help bridge knowledge gaps, explain complex concepts, and serve as a long-term educational partner. Most advisors welcome questions and view education as a central part of their role.
Teach Your Children Well
Teens and young adults are especially vulnerable to costly mistakes with credit cards and student loans. While more states now require financial education in schools, parents play a critical role. Open conversations, transparency, and involving children in age-appropriate financial decisions can foster strong habits and a healthy mindset around money.
Strong financial literacy—paired with realistic financial confidence—helps individuals make better decisions at every stage of life. By planning ahead, simplifying systems, and committing to ongoing education, individuals and families can better protect their financial well-being today and into the future.