The Exact Age When You Make Your Best Financial Decisions

The prime years for making smart financial decisions are, on average, 53 and 54.

At around that age, people have accumulated knowledge and experience about money, spending and saving, but haven’t begun losing key analytic cognitive skills. It’s also roughly the age when adults make the fewest financial mistakes, related to things like credit-card use, interest rates and fees.

Knowing what leads to the financial strength of your early 50s is valuable. Younger adults can delve more deeply into basics like inflation and interest rates to hedge against lack of experience, and those who are older can work to keep their analytical skills sharp.

“As we get older, we seem to rely more on past experience, rules of thumb, and intuitive knowledge about which products or strategies are better,” says Rafal Chomik, an economist in Australia at the ARC Centre of Excellence in Population Ageing Research.

Chomik led a 2022 study that looked at financial literacy, which is the ability to understand financial information and apply it to managing personal finances. Financial literacy typically peaks at age 54 and then declines, according to the study.

The study gauged financial literacy using questions about inflation, interest rates and diversification. One question: If in five years, your income has doubled and prices have doubled, will you be able to buy (A) less, (B) the same, (C) more than today. (Answer: B)

People can—and do—make good financial decisions from their 20s to their 40s, as well as into their 60s and 70s. Chomik, who is 45, says some of his best financial decisions came earlier in his life and involved his 401(k)-type savings account. Contributions were mandatory when he started his first job at around age 18, but once enrolled, he actively chose funds that benefit those who have a longer investment horizon.

Financial decision-making requires a combination of reasoning skills that differ by age. Those in their 20s are better at absorbing and processing new information and computing numbers—so-called fluid intelligence—but don’t have as much life experience or crystallised intelligence—the accumulation of facts and knowledge. Crystallised intelligence tends to improve with age.

Getting help

Beverly Miller, a financial coach who often works with people who are in debt, says she did most things right before her 50s, avoiding credit-card debt, paying off car loans and paying off a 30-year mortgage in 12 years.

But she didn’t invest as wisely as she could have. For example, she moved money in a retirement savings account out of growth funds and into fixed-income funds.

“We would let market changes scare us into making changes we shouldn’t have,” says Miller, 65.

Miller says she and her husband could have made more money if they had left it in growth funds. Likewise, she invested in rental properties, which she thought could be an easy source of income but weren’t.

It wasn’t until she was in her 50s that she and her husband finally turned to a certified financial planner to help with investments, she says.

“In your 50s, you have enough maturity and experience to know you need help,” says Miller.

Age of reason

People make financial mistakes at any and every age, but they made fewer mistakes at the age of 53, according to economic researchers. In one study, economists looked at financial choices made by adults in 10 financial areas, including home-equity loans, lines of credit, mortgages and credit cards, and how those decisions affected fees and interest payments.

Fees and interest payments, across all 10 areas, are at their lowest levels around age 53, according to the 2009 study in the Brookings Papers on Economic Activity. That age was referred to as the “age of reason,” or the point at which financial mistakes are minimised. A financial mistake would include overestimating the value of a house, for instance.

At the age of 53, “people have been dealing with financial markets for years and know how to look for the right financial product, and minimise fees and payments,” says Sumit Agarwal, a professor of finance at the National University of Singapore and an author of the study.

Agarwal turned 53 this year.

“I have a lot of experience capital right now,” he says. “Going forward, I will be making more mistakes and will be slower making decisions.” People can keep their analytical skills strong and continue to make good decisions by reading and exercising the brain, he says.

One financial mistake 50-year-olds tend to make involves underestimating their life expectancy, which can lead to flawed planning decisions about retirement. A typical 50-year-old expects to live until age 76, when actuarial estimates have that person living another decade to age 86, according to Chomik’s study, which looked at surveys in Australia. A 2020 study in the U.S. found that 28% of adults 50 and older underestimated their life expectancy by at least five years.

Kristen Jacks, a 55-year-old financial educator based in New Haven, Conn., says people in their 50s have often experienced enough financial pain to make them more acutely aware of the need to weigh all financial alternatives carefully and avoid mistakes.

“You’re also at the age when you look at your retirement savings and realise you’re running out of years to make it bigger,” says Jacks.

She also works with younger people who can underspend as well as overspend. One young man in his 20s, she says, earned good money as a traveling nurse but was living in a small $600 a month apartment that he hated.

She says her own best financial decisions are lifelong habits. Jacks, who bought a $1,500 certificate of deposit when she was 15 using babysitting money, doesn’t accumulate credit-card debt and lives below her means.

“You do that for 20-plus years, and you are so much better off,” she says.

Former New Hampshire Gov. Chris Sununu delivered a warning to Treasury Secretary Scott Bessent during a recent visit to Washington: Already-high airfares will surge if the war in Iran doesn’t end soon.

Sununu, a Republican who represents some of the biggest airlines as president of the industry group Airlines for America, has for weeks sounded the alarm to Trump administration officials about the economic fallout from high jet fuel prices. The war, Sununu has argued, must come to a close soon, or things will get worse.

Administration officials have gotten the message.

Privately, President Trump’s advisers are increasingly worried that Republicans will pay a political price for the rising fuel costs, according to people familiar with the matter. Many of those advisers are eager to end the war, hoping prices will begin to moderate before November’s midterm elections.

The fallout from the U.S.-Israeli attack in late February has slowed traffic through the Strait of Hormuz, a vital shipping lane, triggering a sharp increase in oil, gasoline and jet-fuel prices.

That means consumers are grappling with high costs ahead of the summer travel season, as they consider vacation plans.

Sixty-three per cent of Americans said they put a great deal or a good amount of blame on Trump for the increase in gas prices, according to a new poll conducted by NPR, PBS and Marist.

More than 8 in 10 Americans said struggles at the gas pump are putting strain on their finances.

Jet-fuel prices roughly doubled in a matter of weeks after the war began, and they have remained high. Airlines have said that will add billions of dollars of additional expenses this year, squeezing profit margins.

U.S. airlines spent more than $5 billion on fuel in March—up 30% from a year earlier, according to government data.

Carriers have been raising ticket prices, hoping to pass the cost along to consumers, and they are culling flights that will no longer make money at higher price levels.

In March, the price of a U.S. domestic round-trip economy ticket rose 21% from a year earlier to $570, according to Airlines Reporting Corp., which tracks travel-agency sales.

So far, airlines have said the higher fares haven’t deterred bookings and they are hoping to recoup more of the fuel-cost increases as the year goes on.

Earlier this week, Trump said the current price of oil is “a very small price to pay for getting rid of a nuclear weapon from people that are really mentally deranged.”

Secretary of State Marco Rubio told reporters that if Iran got a nuclear weapon, the country would have more leverage to keep the strait closed and “make our gas prices like $9 a gallon or $8 a gallon.”

Trump has taken steps in recent days to bring the war to an end. Late Tuesday, the president paused a plan to help guide trapped commercial ships out of the Strait of Hormuz, expressing optimism that a deal could be reached with Iran to end the conflict.

Crude oil prices fell below $100 a barrel on Wednesday, after reports that Iran and the U.S. are working with mediators on a one-page framework to restart negotiations aimed at ending the conflict and opening the strait.

Sununu said Trump administration officials are conscious of the economic fallout from the war: “They get it…and I think that’s why they’re trying to get through the war as fast as they can.”

But he cautioned that it could take months for prices to return to prewar levels.

“Ticket prices won’t go down immediately” after the strait is fully reopened, Sununu said. “You’re looking at elevated ticket prices through the summer and fall because it takes a while for the prices to go down.”

Since the initial U.S.-Israeli attack in late February, Sununu has met in Washington with National Economic Council Director Kevin Hassett, representatives from the Transportation Department and senior White House officials.

A White House official confirmed that Hassett and Sununu have discussed the effect of increased fuel prices on the airline industry. The official said the conversation touched on how the industry can mitigate the impact of high jet fuel prices on consumers.

“The president and his entire energy team anticipated these short-term disruptions to the global energy markets from Operation Epic Fury and had a plan prepared to mitigate these disruptions,” White House spokeswoman Taylor Rogers said, pointing to the administration’s decision to waive a century-old shipping law in a bid to lower the cost of moving oil.

Rogers said the administration is working with industry representatives to “address their concerns, explore potential actions, and inform the president’s policy decisions.”

A Treasury Department spokesman pointed to Bessent’s recent comments on Fox News that the U.S. economy remains strong despite price increases. The spokesman said Treasury officials have met with airline executives, who have reaffirmed strong ticket bookings.

“We’re cognizant that this short-term move up in prices is affecting the American people, but I am also confident, on the other side of this, prices will come down very quickly,” Bessent told Fox News on Monday.

The war has already contributed to one casualty in the industry: Spirit Airlines. Company representatives have said they were forced to close the airline because the sustained surge in jet-fuel prices derailed the company’s plan to emerge from chapter 11 bankruptcy.

The Trump administration and Spirit failed to come to an agreement for the company to receive a financial lifeline of as much as $500 million from the federal government.

Transportation Secretary Sean Duffy has argued that the Iran war wasn’t the cause of Spirit’s demise, pointing to the company’s past financial struggles, as well as the Biden administration’s decision to challenge a merger with JetBlue.

Other budget airlines have also turned to the federal government for help since the U.S.-Israeli attack. A group of budget airlines last month sought $2.5 billion in financial assistance to offset higher fuel costs, and they separately wrote to lawmakers asking for relief from certain ticket taxes.

The Exact Age When You Make Your Best Financial Decisions

There’s a magic number for when your expertise and cognitive powers align

Getting help

Age of reason

Administration officials have spoken to the airline industry, which has voiced concerns about the rising costs.