What if I told you that reading my newsletters could prevent dementia?
It’s not just hubris. Financial literacy helps keep your brain healthy. Financial literacy is an understanding of the basics of personal finance and investing, including things like understanding debt and planning for your retirement.
April is National Financial Literacy Month, but your education shouldn’t stop at 30 days. Learning more about investing will help you take control of your own wealth and secure your retirement.
It’s like I’ve said so many times: You can’t trust anyone else to take care of you.
And as it turns out, it isn’t just your wealth that relies on your financial literacy…
Several studies show that improving your financial literacy keeps your brain healthy as you age.
There is a large body of research indicating that education, even later in life, keeps our brains sharp and staves off dementia. It’s why we encourage our readers to take classes and learn new activities.
Reading, in particular, engages multiple parts of the brain. This increases cognitive health, or your ability to think and make decisions clearly.
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Studies out of Rush University used brain scans to determine that seniors who had better scores on financial literacy tests also had stronger connections between their brain regions. An earlier study also showed changes in gray matter in an area called the medial prefrontal cortex. This is the area responsible for attention and complex decisions. Folks who had less gray matter in that area of the brain also had more problems with financial tests.
A similar study in 2016 from Keck School of Medicine at the University of Southern California focused on the connections in particular.
In the brain, gray matter is the areas full of nerve cell bodies and synapses, or places where signals pass between cells.
White matter contains axons, which are long, noodle-like nerve cells that pass signals to different parts of the brain. They’re insulated in myelin, which appears white.
White matter is important because that’s where all the interactions happen. Damage to white matter means you won’t be able to react to things or will experience problems with movement and reflexes.
When we learn and use financial education, we use different part of our brains. Learning the material uses regions in the temporal-parietal area. That’s a region near the middle-back of the brain. Applying that material uses the frontal lobe of the brain. The researchers wanted to test if greater financial literacy improved the connections between these sections. In other words, they wanted to see how healthy the white matter was between these areas.
What they found was that the more financially literate a person, the stronger the connection.
An important note – these studies show a connection. It’s not a straightforward cause and effect. Although the process of learning and using information strengthens our brains, it could also be that people with healthier brains are more likely to understand and use financial education.
The bottom line… understanding finances and planning for your financial future will improve your wealth and your health.
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Here’s to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
April 26, 2018