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This is the age when you make your best financial decisions
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We all hope to do wise money moves throughout life, avoiding major mistakes that could impact financial security. But could there be an ideal age range in which people truly reach peak financial decision-making ability? New research reveals that, for most, age 50 brings greater financial literacy and fewer mistakes when managing personal finances.
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Hitting Your Groove at 54
A 2022 Study led by economist Rafal Chomik examined financial literacy across all age groups. Financial literacy refers to understanding the basic principles of money management, such as inflation, interest rates, and portfolio diversification. According to the results, financial literacy peaks at age 54, on average, and then slowly declines from there.
Chomik’s research team assessed literacy using questions such as: “If in five years your income doubled and prices doubled, will you be able to buy less, the same or more than today?” (The answer is the same.)
To know more: Retirement Planning: See How Much Money You Really Need to Grow Old
Why the Mid-50s Bring a New Focus
“The reason people start making better decisions is fear,” said Steve Davis, CEO of Total Wealth Academy. “They are realizing, a little late, that they are getting older and that retirement age is approaching quickly.”
With major life milestones approaching, many are feeling motivated to improve their financial skills. But some make critical mistakes, such as underestimating life expectancy or leaving planning too late. By understanding the key reasons why financial wisdom peaks in the 50s, younger people can reap the same benefits sooner.
It’s never too early to make smart money
“Part of the problem is that our educational system doesn’t teach us anything about building wealth,” Davis shared. “It is up to the individual to learn about money and wealth.” Instead of leaving it until age 50, he advises developing financial literacy as early as possible.
Financial manager Vijay Marolia, co-founder of The Cash Square, agrees that age in itself does not mean wisdom. “Anyone can make good decisions with money once they become aware of it. And that is the real issue: the education system has ignored basic and necessary subject matter for decades,” he noted. Marolia believes that adopting healthy financial habits, such as saving, budgeting and investing in your 20s and 30s, leads to better results throughout your life.
While the 1950s bring a sense of urgency for many to improve their financial skills, research shows that it’s never too early to gain financial intelligence. Learning basic concepts early helps you make good choices well before typical peak ages. With the right foundation, your 50s can build on existing strengths rather than playing catch-up.
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This article originally appeared on GOBankingRates. with: This is the age when you make your best financial decisions