Spotting the Financial Warning Signs of Cognitive Decline

Watching our parents age is never easy. But it can be even more challenging if they begin to show signs of cognitive decline.

Indeed, the number of Americans living with Alzheimer’s, dementia, and other types of cognitive impairment is increasing rapidly. That means if your parents are still living independently, there may come a time when they need assistance managing routine tasks like cooking, cleaning, and paying bills.

While it’s normal to experience some memory loss with age, significant changes in cognitive function shouldn’t be ignored—especially when it comes to financial decision-making. Thus, it’s important to be aware of the financial warning signs of cognitive decline, so you can protect your parents and loved ones from scams and other issues that threaten their financial well-being.

Why Financial Warning Signs Matter

In many cases, your parents may not realize or be willing to admit that their cognitive abilities aren’t what they used to be. Unfortunately, this can lead to significant financial problems, including mounting debts, financial exploitation, and even bankruptcy.

To avoid potentially devastating consequences, it’s important to keep an eye out for signs of unusual financial behavior. The earlier you detect the warning signs, the more likely you’ll be able to manage the problem and its potential damage.

Financial Warning Signs of Cognitive Decline

There are a multitude of warning signs that can signal cognitive decline in seniors, many of which relate to financial management. These signs may not always be obvious, so it’s important to be vigilant and know what to look for.

Forgetting to Pay Bills

One of the key financial warning signs of cognitive decline is forgetting to pay bills—especially if your parents have been diligent about making on-time payments in the past.

Missed payments can result in late fees, interest charges, and damage to your parents’ credit scores. In some cases, forgetting to pay the bills may even lead to legal action if their missed payments go into collection.

If you notice your parents struggling with bill payments, it may be time to step in and help. For instance, you may need to assist with bill payments and account management or connect them with resources in their community who can help oversee their financial matters.

Unusual or Unexplained Spending

If your parents start to make purchases they can’t afford, buy unnecessary items, or become more impulsive in their spending habits, this may be a sign of cognitive decline. In some cases, they may also struggle to keep track of what they’ve spent or remember whether they’ve made a recent purchase.

One way to detect unusual spending is to keep a close eye on your parents’ bank account and credit card statements. In addition, an accumulation of clutter or unopened packages may indicate that they’ve forgotten about their purchases or can’t keep up with the influx of new items.

While it may be uncomfortable, don’t be afraid to ask your parents about their spending if it seems out of character. If they can’t remember or explain their purchases, you may need to intervene, so they don’t continue to deplete their financial resources.

Sudden Generosity or Giving Away Large Sums of Money

Cognitive decline can also manifest through sudden acts of generosity or giving away large sums of money. This may include giving money to strangers, care givers or even unsavory unknown entities, possibly due to a loss of judgment and sound decision-making abilities.

If your parents are generous or charitable by nature, gifting money to others may not seem unusual. Nevertheless, it’s important to look for any sudden changes in financial behavior that may be indicative of a larger problem.

You should also be aware of changes to their social circle, especially if they’ve been giving money to new acquaintances. This may be a sign that someone else is influencing their behavior, which can make them more susceptible to scams and financial exploitation.

Falling Victim to Financial Scams

One of the most concerning financial warning signs of cognitive decline is falling victim to financial scams. Scammers often target seniors to exploit their vulnerability and confusion, leading them to make rash financial decisions.

For example, your parents may receive phone calls or emails from scammers posing as a government official, a relative in distress, or a bank representative asking for personal information or requesting money transfers. If they’re experiencing cognitive decline, they may not be able to recognize scams or distinguish between legitimate and fraudulent requests.

To protect your parents from financial scams, be sure to monitor their financial activity, periodically review their bank statements and credit card bills, and educate them about common scams. If they’ve already fallen victim to one or more scams, it may be a sign that they’re no longer capable of managing their personal finances.

Difficulty Managing Personal Finances and Investments

Lastly, difficulty managing personal finances and investments is generally another red flag when it comes to cognitive health.

For example, your parents may suddenly have trouble balancing their checkbook, creating a budget, or making routine investment decisions. They may also forget to update important financial documents like their will or insurance policies, leading to costly mistakes or missed opportunities.

Meanwhile, they may start to make risky investment decisions or become avoidant of financial risk altogether. Either can indicate cognitive decline and potentially lead to permanent capital loss.

The Importance of Early Detection and Intervention

The keys to protecting your parents’ financial well-being are early detection and intervention. If you notice any of these financial warning signs in your parents, it’s important to seek help.

A wealth advisor like CornerCap can help evaluate your parents’ financial situation and create a plan for managing their assets. You may also want to consider working with an elder law attorney or a geriatric care manager, who can provide additional support and resources.

By being aware of the warning signs of cognitive decline and taking action when necessary, you can better support your parents and help their financial future remain secure. Please contact us to learn more about how we can help you and your family put the right safeguards and plans in place to preserve their wealth for generations to come.