Finance at its peak: Why age 54 is the "age of reason"

Are you curious if there's a "magical" age when our financial management skills are at their peak and our financial decisions are particularly accurate? Scientists claim that such an age does indeed exist. Research on this topic was published by The Wall Street Journal.

Effective financial management relies on several key elements. Knowledge and experience in budgeting, saving, and investing, combined with analytical thinking skills, are essential for making sound financial decisions. Research has shown that we handle finances best at 53-54, according to "The Wall Street Journal."

Experts indicate that after age fifty, we gain enough experience to accurately navigate financial matters and use this knowledge to make prudent decisions. This period in life is often called the "age of reason."

Rafal Chomik, an economist at the Australian research center ARC Centre of Excellence in Population Ageing Research, explains that as we age, we increasingly rely on past experiences, proven principles, and intuitive knowledge about which financial products or strategies are more advantageous.

According to WSJ, Chomik's research focused on the ability to understand financial concepts and their application in managing personal capital. The analysis results show that we make the best financial decisions around age 54 when our financial competencies peak and gradually decline.

The study assessed financial knowledge through questions about inflation, interest rates, and diversification – as read on the "WSJ" website. One of the questions was: "If in five years your income doubles and prices double, will you be able to buy (A) less, (B) the same, (C) more than now?" – read one of the questions.

Researchers' findings do not mean individuals aged 20, 40, or 60-70 cannot make sound financial decisions. Each age group has its advantages and certain limitations in the context of money management.

According to the WSJ, people in their 20s are better at absorbing and processing new information and numerical calculations—that's so-called fluid intelligence. However, they lack the rich life experience and crystallized intelligence—the accumulation of facts and knowledge—that develops with age.

Kristen Jacks, a 55-year-old financial educator, claims that people over fifty often have enough experience to be aware of the need to consider all alternatives and avoid financial mistakes carefully.

Experience with spending and saving, along with later life stages, leads to well-thought-out financial decisions. As Jack says, "You're also at the age when you look at your retirement savings and realize you're running out of years to make it bigger."