Financial Knowledge Is Power: Examining Older Adults’ Income Security & Financial Understanding

Managing finances can be challenging at any age, but may be particularly important for older adults on a fixed income. In a study that earned a Bronze 2021 Innovative Research on Aging Award, researchers investigated the importance of older adults’ financial knowledge for preventing material hardship.

Researchers analyzed survey responses from 2,863 participants age 50 and better (average 63). Participants reported whether they had experienced material hardship within the 12 months prior to the survey, which included difficulty paying for bills, food, housing, or medical needs. Income security was calculated based on household income, household size, and county-level cost of living for older adults. A set of questions assessing participants’ understanding of financial concepts, such as interest rates and risk diversification, was used to measure financial knowledge. Other characteristics, such as age, race, gender, and education were also accounted for.

As might be expected, researchers found that greater income security was related to less material hardship. However, this was not the entire picture. When financial knowledge was incorporated, income security had an even stronger association with material hardship. This means that older adults with greater income security were even less likely to report material hardship if they also had strong financial knowledge. On the other hand, those with low income security were even more likely to report material hardship if they had weak financial knowledge.

Overall, this study showed that financial knowledge was important for all older adults, regardless of their income. Utilizing county-level cost of living rather than a single measure of household income was a particular strength of the study, as it helped to account for the expenses participants may have had. The researchers suggested that with greater financial knowledge, older adults are able to utilize their resources more efficiently. The findings also support the need for program offerings designed to help boost knowledge of financial concepts and planning. Even older adults who are reluctant to participate based on having middle or high income can benefit from these programs.


Want to keep up with recent research that’s relevant to aging services? Use the form below to subscribe to our monthly InvestigAge email.



Li Y, Mutchler JE, Miller EA, Tucker-Seeley R, and Xiao JJ. Does financial knowledge at older ages matter? Placing income and hardship in context. Journal of Poverty (2021).

Self-Fulfilling ProphecyHow Perceptions of Aging Affect Our Later Years

Learn how older adults’ perceptions of aging—and their self-perceptions—can have serious effects on their health, behaviors, and even longevity.

Download FREE Copy

    Add insight to your inbox

    Join our email list to receive information about the latest research from Mather Institute. Just complete the form below to subscribe.

    Thank you!

    You are now subscribed to the email list.
    A confirmation has been sent to the email you provided.

    Continue to Website Share with a Friend