Bad Financial Decisions May Be Sign of Dementia

Education level plays a role in risk

The study found no correlation between decreased credit scores or payment delinquency and other medical conditions, such as hip fractures, arthritis or glaucoma. (In fact, glaucoma was more commonly associated with a lower risk of missed payments and subprime credit scores.) Heart troubles, such as heart attacks, were associated with financial difficulties, but only in the year immediately previous to the event.

People with lower education levels showed financial deterioration much sooner than their peers with higher education levels. Those with less education saw financial deterioration nearly seven years before a dementia diagnosis, compared to about two and a half years for the more highly educated cohort. About 14.7 percent of Americans over the age of 70 are diagnosed with some form of dementia.

Nicholas cautions that a single missed payment doesn’t mean you are on the road to dementia — but it shouldn’t be overlooked either. “The vast majority of missed payments are due to things other than dementia, so we don’t want people to see the results and panic the first time something goes wrong. But at the same time, we’re seeing that things start going wrong up to six years before the formal clinical recognition,” she says.

Financial advisers, accountants can help

One problem with diagnosing dementia through financial transactions is that it can be difficult to track someone’s finances without their permission. If you are concerned about someone’s harmful financial decisions, one person who may be able to help is a financial adviser or accountant. They can often spot troubles in advance.

“A lot of times, a client would call and either tell us they were becoming forgetful, or ask the same question over and over,” says Jack Scaff, a financial adviser and principal at Brouwer & Janachowski in Mill Valley, California. “It took several years to become full-fledged, but we knew something was going on. Sometimes it’s just obvious.” Besides such familiar signs of dementia as repeating themselves, those with early dementia may start giving away money — or, worse, getting entangled with fraudsters.

Financial custodians may contact authorities if they suspect elder abuse or fraud, but Scaff says that if you’re worried about someone’s deteriorating financial abilities, it makes sense to try to get permission from that person to speak to their adviser or accountant and check on their behavior. (Advisers may not be able to speak to you otherwise because of confidentiality agreements.) It’s not always easy to get permission, he says, but it’s probably easier than getting the legal authority to intervene in someone’s spending via the courts.