Dollars & Sense: How Age Determines Monetary Decision-Making

A recent study attempted to identify differences in monetary decision-making behaviors between older and younger adults. The authors were interested in two factors: decision quality, which they defined as the frequency participants chose options associated with the greatest expected monetary value, and risk aversion, or participants’ propensity to choose options with lower coefficients of variability.

Prior to the decision-making experiment, participants’ cognitive abilities and level of affect—both positive and negative emotions—were measured. Older participants tended to score lower on cognitive ability measures, and were less likely to choose options with the greatest expected monetary value compared to their younger counterparts. From these results, the researchers surmised that older adults have decreased cognitive abilities, which lead them to make choices lower in decision quality. (High quality decisions were more likely to result in a greater amount of cash once the experiment was completed—to the tune of approximately $27 USD.)

The age of older participants was positively correlated with higher levels of positive affect and lower levels of negative affect. That said, older adults didn’t display significantly lower risk aversion than younger adults. Thus, the authors argued their higher overall level of positive affect—of which positive spectrum emotionality has been found to be related to riskier decision-making—was likely the factor underlying what the researchers deemed to be poorer choices.

To summarize, the study reported two main findings that the authors attributed to distinct psychological functions: The first underlying catalyst is cognitive ability (or lack thereof) in older adults; and, the second is emotionality in the form of happier, yet riskier decision-making. The researchers concluded that aging tarnishes one’s ability to make both high value and safer monetary decisions.

Although it is possible that older adults who are happier and less cognitively adroit make poorer monetary decision, it behooves future researchers to consider what a 70-year-old risks by missing out on $27 when compared to a lifetime of losses that were likely worth quite a bit more.


Pachur T, Mata R, and Hertwig R. Who dares, who errs? Disentangling cognitive and motivational roots of age differences in decisions under risk. Psychological Science (2017); 1-15.

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