As You Age, You Get Better and Worse with Money

Here's how you can get smarter with money quicker and stay smart for longer

Psychologists have found there are two primary forms of intelligence that impact our ability to make financial decisions throughout our life; fluid and crystallized intelligence

In this second entry in the Dollars & Decades series, I’ll explain these two forms of intelligence, how they change as you get older, how they help you make financial decisions, and provide research-backed tips on how to increase each to make better financial decisions.

What are fluid and crystallized intelligence?

Fluid intelligence: Your ability to process new information in an unfamiliar situation to make the best decision possible.

Crystalized intelligence: Knowledge you have accumulated over time to help you solve problems you have already encountered.

How do fluid and crystalized intelligence relate to financial decision-making?

The TLDR Version:

In entry one of the Dollars & Decades series, I discussed why the young and old struggle with financial decisions because the form of intelligence they excel in doesn’t match the type of money decisions they need to make.

Young people have more fluid intelligence but lack the crystallized intelligence to deal with repetitive and relatively simple decisions like budgeting and saving. As we age, we lose fluid intelligence but gain crystallized intelligence—which is unfortunate because fluid intelligence is what’s needed for the complicated financial decisions older people make, like estate planning.

The detailed explanation: