Health & Financial Literacy: Important Foundations for Decision-Making

Researchers at the Rush University Medical Center examined the influence of health and financial literacy on decision-making ability among community-dwelling older adults without dementia. Their findings indicate that health and financial literacy, which can vary tremendously across individuals, is important to make good health care and financial choices.

Although it may seem like common sense that literacy leads to good decision-making, the truth is not so simple. Psychological and gerontological researchers have shown that merely having good information does not always mean that this information is applied in decision-making, since, in practice, these decisions are often based on other factors. Although health literacy has been associated with good health outcomes, it is unclear whether a causal relationship exists, or whether both literacy and health outcomes are driven by an underlying variable, such as cognitive ability or level of education. Older adulthood is a period of crucial health and financial decision-making, so it is important to understand how to help individuals reach good decisions.

To address the question of whether health and financial literacy contribute to good decision-making, the researchers administered literacy and decision-making tests to 525 older adult participants in the Rush Memory and Aging Project. All participants in the literacy and decision-making study were living in the community and without dementia.

Health and financial literacy were assessed by questions on basic knowledge of financial and health information, such as Medicare, the causes of heart disease, the stock market, and numeracy (such as calculating interest rates). Decision-making ability was assessed by a 12-item version of a previously validated scale called the Decision-Making Competence Assessment. This assessment asks participants to make a decision based on a hypothetical health care or financial situation. For example, the participants may be presented with data about multiple health care plans and asked to choose the plan that has high customer satisfaction and good access to service. The financial section of the scale involves choosing among hypothetical mutual funds.

Participants also self-reported demographic information and were administered a battery of cognitive tests, as part of their participation in the Memory and Aging Project. Participants were also assessed for depressive symptoms and chronic medical conditions as part of the larger study. The researchers analyzed the statistical relationship between the literacy and decision-making tests, adjusting for demographic factors in one analysis, and adjusting for both demographic factors and cognitive ability in another.

Overall, health and financial literacy had a positive correlation with education, cognitive ability, and income, and a negative correlation with age and depressive symptoms. Despite this, there was a moderate-to-strong positive association between literacy and decision-making skill, even when factoring in the other variables. Analysis of the interaction between variables indicates that literacy may have an ever greater influence on health care decision-making among older individuals, individuals with lower incomes, and those with lower cognitive ability. This study supports the usefulness of encouraging health and financial literacy among older adults.


James BD, Boyle PA, Bennett JS, and Bennett DA. The impact of health and financial literacy on decision making in community-based older adults. Gerontology (2012); DOI: 10.1159/000339094.

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