Researchers from Maryland and Michigan recently published an article showing that six years prior to their diagnosis, individuals developing Alzheimer’s disease or a related disorder were more likely to miss paying a bill compared to older adults without such a diagnosis (7.7% versus 7.3%), and they were also more likely to develop subprime credit scores (7.9% versus 6.9%). As the authors concede, there were a number of problems with the study, including unequal matching of the average age of the groups (79.4 versus 74.0 years), which could mean that the results were actually due to age, rather than Alzheimer’s disease. The authors did attempt to adjust for this difference with their statistical analyses, but sometimes that doesn’t fully correct for this type of inequality.
The tip of the iceberg
The biggest problem with the study, however, is that it grossly underestimates the true financial difficulties that those developing Alzheimer’s disease face. After reading this article, you might think, “Well, these differences are only 1% or less, that’s not a big deal.” But the article does not address the major financial issues facing people developing Alzheimer’s disease: poor decision-making and the related issue of falling victim to financial scams.
How many times a week — or a day — does your phone ring with someone offering you a new credit card, car loan, or investment deal? How often do you get a call from someone saying they are from your credit card company or the social security office?
Scams are a huge problem, with one of every 18 cognitively intact older adults in the United States falling victim to one. But individuals with Alzheimer’s dementia and those in the pre-dementia stage of mild cognitive impairment are even more susceptible. In fact, research in healthy older adults suggests that susceptibility to scams may be related to shrinkage in memory-related structures in the brain — some of the same structures that shrink in Alzheimer’s.
Impaired judgement and decision-making
Individuals with Alzheimer’s disease fall victim to scams because they have impaired judgment and decision-making. Making financial decisions requires the coordinated function of many brain systems in order to retrieve prior information from memory, incorporate new information into memory, keep that information in mind, and analyze it. Individuals with Alzheimer’s disease have trouble with the brain systems involved in all of these functions.
It is this difficulty with decision-making and judgment that leads to the next two biggest financial problems in Alzheimer’s disease. The first is donating too much money to legitimate causes, and the second is making poor financial investments.
You may have been called recently by your local police or firefighters’ pension fund, in addition to calls from organizations like Save the Children. Perhaps you do want to donate to some of these causes. But did you already donate to that organization last month? How much money should you give? How frequently should you give?
It can be difficult for anyone to keep track of all of these legitimate causes, and to donate an appropriate amount within your budget. Individuals with impaired memory and judgment have much more trouble knowing which charities they have already given to recently — and when they need to stop donating money so that they’ll have enough for this month’s food, rent, and heat!
Even the most intelligent individuals with excellent memory will sometimes make poor investment decisions leading to significant financial losses. Given their complexity, it is not surprising that many individuals who eventually develop a memory disorder made poor investment decisions in the years prior to their diagnosis. Unfortunately, I have seen many families’ life savings wiped out in this way.
Protect yourself and your loved ones
Luckily, there are some simple things that you can do to protect yourself and your loved ones from these types of financial problems.
- Avoid the scams by not answering the phone unless it is someone you know. Even better, you can set up your smartphone to silence unknown callers.
- Decide in advance for the year which legitimate charities you’d like to donate to. Write out checks to them and don’t respond to any other requests.
- Make investment decisions with a trusted family member, friend, or financial advisor. Financial investment decisions can always use an extra pair of eyes.
- If you’ve done all these things and you’re still having problems, try setting up a separate bank account containing only a small sum of money and a credit card with a low spending limit.
These measures will allow one to continue day-to-day living without purchasing expensive items or giving away large sums of money.