Financial Literacy Among Older Adults

December 3, 2025

Financial literacy is the ability to understand and manage personal finances, including skills such as budgeting, saving, investing, and managing debt in order to make informed decisions about spending and saving. It has become the focus of much effort centered on children and young adults to prepare them to better manage the financial aspects of their lives, invest effectively, and plan for a comfortable future. However, financial literacy declines at older ages and can lead to adverse outcomes. Furthermore, although the rate and likelihood of decline have been found not to differ significantly by gender, the fact that women enter old age with lower financial literacy levels than men make declines more problematic for women because they typically live longer and need to fund longer retirements. What can be done?

At NCTR’s 103^rd Annual Conference in Salt Lake City this October, one of the highest rated sessions was an interview of Mellody Hobson, Co-CEO and President of Ariel Investments, a valued NCTR Commercial Associate member, conducted by NCTR’s current President, Tina Leiss, Executive Officer of Nevada PERS. Ms. Hobson stressed fostering financial literacy in children as early as kindergarten, focusing on nurturing curiosity, transparently discussing finances and ensuring children understand the cost of items. Hobson also underscored the critical role of teachers in fostering financial literacy among children, explaining how she believes that teachers can significantly impact students’ financial habits and well-being by providing effective financial education.

A perfect message for educators, and the session was very well received. But what about when children grow up, become adults, and then retire? Financial literacy still matters, and this should be of interest to NCTR’s retirement systems as they work to support the retirement security of their members.

Therefore, NCTR wants to draw attention to a new study by the Pension Research Council (PRC) at the Wharton School of the University of Pennsylvania entitled “Declining Financial and Health Literacy Among Older Men and Women” that examines this important topic and provides valuable insights in this regard. Comments from one of the new report’s authors, found in a recent PLANSPONSOR article on the new report, helps in understanding how plan sponsors and administrators can incorporate insights from this study into communications for older plan participants related to investment choices and retirement income decisions.

As Emily Boyle, a reporter from PLANSPONSOR, explains at the outset of her coverage, when adults age, “their health and financial literacy remain critical to their ability to make informed choices about medical care, insurance, day-to-day health management and retirement income. Yet their abilities to do so decline considerably.”

The new PRC research tracked more than 1,000 older adults (three-quarters of the subjects were female), with a mean age of 81 at the start of the study, and asked them 32 questions designed to measure knowledge of health and financial information and concepts, as well as numeracy; there were 23 questions on financial literacy. This was done for up to 12 years after establishing the initial baseline.

An analysis of the responses showed that 87 percent of participants experienced a decline in their financial health and literacy scores as they aged, with participants’ average combined baseline score of 70 percent declining by about one percentage point per year. The analysis also found that those who scored the lowest at the start of the study (the baseline) were also most likely to experience declines, as were older and less-educated respondents.

In an e-mail response to Boyle’s questions, Gary Mottola, research director of the FINRA Investor Education Foundation and co-author of the new report, said these declines “are linked to poorer financial decisions, increased scam susceptibility and lower financial well-being.” He also said that “women have lower financial literacy levels than men, which makes declines more problematic because women typically live longer and need to fund longer retirements.”

Specifically, men scored 3.6 percentage points higher than women at the study’s outset (baseline), but their likelihood and rates of decline over time do not differ from women’s, controlling for age, income, education, and medical conditions, the analysis discovered. (Similar patterns were observed for financial and health literacy separately.) The persistence of this financial and health literacy “gender gap” suggests that efforts to improve financial and health literacy among both women and men prior to old age would help but would not close the gender differential in financial and health literacy, the report concluded.

Mottola also stressed to the reporter that any such efforts should therefore recognize that women face “compounding risks,” including lower incomes along with longer lifespans and lower literacy levels, all of which can put them at greater risk of “financial fragility” later in life when they are confronting important decisions including when to claim Social Security benefits, whether to take a lump sum or annuity payment from a pension plan, and how not to outlive their retirement savings.

“These are complex decisions, and making mistakes, potentially because of declining financial literacy, could negatively impact older adults’ financial well-being later in life,” Mottola told the reporter.

The reporter also asked why there was a gender gap to begin with, and she said Mottola responded that the gap is not completely about what men and women actually know, but that it also “reflects how they answer the questions asked of them.”

That is, he said, studies “consistently find that women are more likely than men to answer, ‘I don’t know’ on a financial literacy test, rather than guess.” But he went on to note that most researchers score a response of “I don’t know” the same way that they score an incorrect answer. That could suggest that women lack confidence more than actual knowledge, while men’s overconfidence means that their scores “may occasionally benefit from guessing correctly.” (Interestingly, the reporter noted that in a separate study from FINRA, women who were not given the choice to answer “don’t know” on a literacy test scored higher than those provided with a “don’t know” response option.)

In summary, the PRC study concludes that older women perform less well than men in terms of both financial and health literacy, and that this gap does not close with age. This finding “should be a matter of concern not only for healthcare providers and policymakers, but also for financial institutions and organizations engaged in efforts to protect financial wellbeing in later life,” the report stresses. The conclusions also underscore that “[o]lder persons with lower literacy are often poorly prepared to make appropriate financial and healthcare decisions and women’s longer lifetimes, lower incomes, and lower literacy levels put them at greater risk of financial fragility in later life, as well as making worse health-related decisions.”

PRC says additional research is needed to identify which strategies can help both men and women maintain or even enhance their financial and health literacy at older ages, with the understanding that women may benefit relatively more due to their initially lower literacy levels and longer lifespans. “Prior research has found that building human capital via educational and retirement planning programs, particularly starting young, builds financial resilience in later life,” it also stressed. Finally, the report cautions that “a one-size-fits-all approach will probably not address saving and health knowledge shortfalls equally across the entire older population, in view of the different patterns we discerned by educational levels, income, and age.”

As Investopedia explains, financial literacy is “the essential foundation for a smart relationship with money” and the “start of a lifelong journey of managing the financial aspects of your life.” Also, knowing the basics of money management, budgeting, saving, and investing “contributes to a more successful and less stressful life.” In short, “[t]he earlier you start to become financially literate, the better off you’ll be,” it concludes.

However, as the new PRC study emphasizes, financial literacy has to be an on-going process – dare we say from cradle to grave — and unless it is pursued effectively in old age, many of its earlier benefits may be lost. Food for thought for all of us who work for the long-term retirement security of teachers, other educational support professionals, and all the other public employees who safeguard our society and make it strong.