AsianScientist (Jan. 8, 2019) – Researchers from the National University of Singapore (NUS) report that when it comes to making financial decisions under uncertainty, older adults will regard the financial outcomes of others’ as their own and make choices that they would have selected for themselves. The findings are published in Psychology and Aging.
People often need to make financial choices for themselves, and sometimes, 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, Assistant Professor Yu Rongjun and his team at NUS conducted studies to compare how younger adults and older adults make financial decisions, both for themselves and for others. The study involved 191 Singaporean participants, of which 93 were older adults with an average age of 70, while the remaining 98 were young adults averaging 23 years of age.
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 uncertainties. The research team used computational modeling 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 showed 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. For the seniors, they make similar choices for themselves and when they act for others. Hence, the findings suggest that older adults care more about strangers’ welfare.
“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 Yu.
To deepen their understanding on the financial decision-making process of people from different age groups, the researchers will be conducting neuroimaging studies to examine the underlying neural basis of their observations.
“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 is important to not only understand how these elderly 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,” Yu concluded.
The article can be found at: Pornpattananangkul et al. (2018) Choosing for You: Diminished Self–other Discrepancies in Financial Decisions Under Risk in the Elderly.
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Source: National University of Singapore; Photo: Shutterstock.
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