Your Brain Health and Your Financial Health Are Linked In More Ways Than One

It usually happens without warning. There’s a bank, brokerage, stock market, or property collapse, so people wave goodbye to a good chunk of their wealth. Such financial shocks are devastating and can take a toll on a person’s mental health.

Turning this on its head, with cognitive decline comes less ability to deal with finances, which can also lead to a loss of wealth.

If you are concerned about a loved one’s memory, a unique study suggests you should peruse their bank statements.

Key Takeaways

• Financial and cognitive health influence each other; significant financial loss can harm brain function, and cognitive decline can lead to poor financial decisions and wealth loss.
• Major financial losses increase the risk of heart attacks, strokes, and premature death, particularly in individuals over 50.
• Early cognitive decline can manifest in financial behaviors, such as excess spending, which can be detected through bank statements.

More Heart Attacks – Shorter Lives

The Wall Street crash, the bursting of the dot com bubble, and the financial crisis of 2008 are just three examples of disasters that can decimate a person’s wealth. A major loss of wealth can also occur because of divorce or major illness in the family.

The consequences can be far-reaching, not just for a person’s finances but also for their health. A new study found stock market turbulence was linked to an increased risk of heart attacks and strokes. [1]

Even your life is in danger. People in their fifties who lost three-quarters or more of their total wealth over two years were 50 percent more likely to lose their lives over the following 20 years. [2]

With large wealth losses, the brain is harmed by increased stress, depression, reduced social engagement, and a pullback in healthcare spending. Poorer cognitive function in later life is linked to economic downturns during early and mid-adulthood. [3]

While the effect of early and midlife wealth shocks has been studied, it’s unknown whether negative wealth shocks in later life affect cognition. Hence, a research group from the University of Michigan decided to find out.

Wealth Shock Impact Depends on Where You Live

The researchers extracted data on 9,465 seniors taking part in health and retirement studies in the U.S., China, Mexico and England from 2012 to 2018. Researchers included assessments of memory, orientation, attention, executive function, and verbal fluency performance as part of these studies.

The findings showed a 75% or greater loss of wealth – mostly from losses in housing value - resulted in poorer cognitive function, but this applied to the U.S. and China only. The reason for the difference between countries isn’t known, but government policies and social safety nets are thought to play a role in protecting the health of older adults from wealth losses. [4]

The link between wealth and cognition also works in reverse.

A survey of thousands of older adults found that for every 10% loss of memory came a 15% to 20% drop in overall wealth. Declining brain function clearly impacts a person’s ability to make financial judgments.

That being the case, clinical geropsychologist Peter Lichtenberg at Wayne State University wondered what clues to cognitive decline might appear in a person’s bank statements.

Bank Statements Point to Cognitive Decline

To find out Dr. Lichtenberg devised the WALLET (Wealth Accumulations & Later-life Losses in Early cognitive Transitions) study. It takes the unique approach of analyzing a year’s worth of participants’ checking account statements for signs of excess spending and other anomalies.

Half the enrolled 150 participants, aged 59 to 96, had normal cognition while the other half had either mild cognitive impairment or subjective memory complaints. Researchers gathered information on each participant’s sociodemographic, health, and disability status. They were also assessed for memory function, financial decision-making and financial literacy.

The results showed those with early memory loss had significantly higher excess spending than those with no memory loss.[5]

“The WALLET study demonstrates the important links between cognitive status, other financial abilities, and excess spending,” said Dr Lichtenberg, “and especially how financial decision-making and management can impact wealth loss.” [5]

Summary

Financial health and brain health are deeply intertwined. Major financial shocks, such as stock market crashes, can have severe impacts on mental and physical health, increasing risks of heart attacks, strokes, and even premature death. Conversely, cognitive decline can impair an individual’s ability to manage finances, leading to significant wealth loss. A study called the WALLET (Wealth Accumulations & Later-life Losses in Early cognitive Transitions) study, revealed that early cognitive decline can be detected through anomalies in bank statements, highlighting the strong relationship between financial management and cognitive health.