How does age impact our ability to make good decisions?
One of the key roles of a coach is to help their clients take action to move forward. Clients are not always consciously aware of the obstacles that prevent them from doing so. Risk is one factor that impacts how decisions are made and although the term generally refers to financial risks, it can also apply to the decision making process on a broader level. How one views risk is a continuum and can range from risk aversion — a preference for a sure outcome over a prospect with an equal or greater expected value, to being a risk seeker, a preference for a sure outcome over a prospect with an equal or greater expected value (Tversky & R., 1995). People who are risk averse are more conservative and have a tendency to invest in safe, low yielding financial options and secure employment with limited advancement (Cramer A., J., N., & C.M., 2002). These attitudes can lead to stagnation, while being a risk seeker can lead to premature death through smoking, drinking, drugs, unsafe sex reckless driving or gambling.
What prompts some of us to avoid risk and others to seek out risky situations? Can managing how we perceive risk be taught and if so how? Numerous studies indicates our perception of risk is influenced by one or more factors related to genetics, personality traits, gender, economics, education emotions, how the brain functions or age.
How does one’s perception of risk impact the decision-making process and what factors do we need to consider to help our clients make decisions successfully?
Age and the Perception of Risk
When considering the individual’s perception of risk and their age, most studies to date have focused on understanding how the younger population perceives risk and its influence on decision making, however little research has been conducted regarding senior citizens. As more of the population become older, it’s important to understand how age impacts the decision making process. To further explore the connection of risk aversion with decision making in older adults, a sub-study was conducted with 606 people (with an average age of 82.4 and dementia free) as a part of the Rush Memory and Aging Project (Bennett, J.A., A.S., C., J.L., & R.S., 2005). The study assessed both risk aversion and decision making (Boyle, Yu, S., & Bennett, 2012). To address risk aversion participants were asked 10 standard behavioral economic questions to make choices with certain outcomes and uncertain outcomes with possibility of gain or no gain. Additionally, researchers used the Decision Making Competence Assessment and asked the participants 12 questions. Adjustments in the study were made for age, sex, education and cognition.
Results indicated that risk aversion and age were negatively associated with decision-making (older persons made poorer decisions and experienced greater risk aversion). The study also revealed in contrast that education, male gender, income and global cognition were positively associated with decision making. (Boyle, Yu, S., & Bennett, 2012).
Texas Tech University conducted a study with 3, 603 participants to determine if basic understanding of financial literacy declined after age 60. Participants were asked 20 questions across four content areas – basics, borrowing, investment and insurance. While financial literacy decreased an average of 2.5 % between the ages of 60 and 88, confidence remained did not decline, regardless of education, race or socioeconomic status. (Finke, Howe, & Huston, 2011)..
Given the increasing percentage of adults becoming senior citizens, age and how it effects the decision making process is a core factor to consider when coaching middle age and senior clients. David Brashears, the first American to reach the summit of Mount Everest recently made two important points when interviewed about risk. When making decisions, we must know our world and get as much information as we can. The more we know, the more we can be aware of potential pitfalls. Risk occurs when we are overly confident without enough information or too ambitious without enough experience. Elderly may believe their experiences is enough to make good decisions, however a false sense of confidence may hurt them in the long run. Seniors are less likely to recoup the results of poor decisions and need to be made aware of their physical and mental vulnerabilities while simultaneously being sensitive for their desired need to be independent.
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