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The memory loss and cognitive decline associated with dementia can cause persistent issues with a person's finances long before diagnosis, according to a new study from Johns Hopkins University. For older adults and the loved ones who care for them, concerns about managing money are real, and dementia can lead to financial errors, irregular bill payments and increased susceptibility to financial fraud. Finding ways to help older adults manage their money and maintain their credit is key, whether they've been diagnosed with dementia or may be at risk.
Financial Problems Are an Early Indicator
Researchers at the Johns Hopkins Bloomberg School of Public Health and the Federal Reserve Board of Governors reviewed de-identified Medicare claims and credit report data for more than 81,000 people living in single-person households. About 1 in 3 people studied were diagnosed with dementia over a 15-year period. Researchers reviewed their financial outcomes beginning up to seven years prior to diagnosis and for four years following diagnosis. They also compared these outcomes with the finances of people who weren't diagnosed with dementia, and those who had other health difficulties.
Here's what they found:
- Missed bills are an early warning sign. Study participants diagnosed with dementia were more likely to miss bill payments starting as early as six years before a clinical diagnosis.
- Problems with paying bills can lead to credit issues. Missed payments and other adverse financial outcomes led to an increased risk of developing subprime credit scores (credit scores rated fair or lower) starting 2.5 years before a dementia diagnosis.
- Being late on bills is a persistent problem. Rates of late payments and subprime credit risk persisted for up to 3.5 years after beneficiaries received dementia diagnoses.
"Our study is the first to provide large-scale quantitative evidence of the medical adage that the first place to look for dementia is the checkbook," says study co-author Lauren Hersch Nicholas, Ph.D., an associate professor in the Department of Health Policy and Management at the Bloomberg School. "Earlier screening and detection, combined with information about the risk of irreversible financial events, like foreclosure and repossession, are important to protect the financial wellbeing of the patient and their families."
Start a Conversation and Establish a Plan
So, what should older adults and their family members do with this information? The first step is to start a conversation—and the earlier, the better. It is far easier to open a dialogue and establish a plan before any major money problems arise, when all parties are able to collaborate. You can always keep a plan on the back burner unless and until it's needed.
Be watchful and respectful. Managing your own money is a keystone of independent living. Giving up that control can be sad and scary, especially for someone who is experiencing dementia. Having someone keep a watchful eye on finances can be vital, but so is helping the person living with dementia maintain as much autonomy and dignity as possible.
Consider a financial power of attorney (POA). A POA for finances enables a trusted caregiver to manage another person's finances on their behalf. The POA can take effect immediately or in the event of mental or physical incapacity.
Add a trusted caregiver to accounts. Having a trusted caregiver act as co-owner on checking and savings accounts gives them the ability to pay expenses in an emergency. They can also use online or mobile banking to monitor account activity, pay bills, set up account alerts and more.
Limit or close credit lines. Closing credit card accounts can be a useful safeguard against overspending. If you want to keep credit accounts open, you may be able to have card issuers turn cards "off" or set spending limits electronically.
Use modern money tools. Convenience features can be a substantial help to older adults and their financial caregivers. A few to consider:
- Reloadable prepaid cards: These function like credit or debit cards but have preset limits and don't link to credit lines or checking accounts.
- Automatic payments: This is a way to ensure critical bills like mortgage payments, insurance, utilities and credit cards are paid on time.
- Account alerts: Caregivers can be notified when account balances drop below a preset level, or even can be sent texts whenever a transaction is made.
- Spam-blocking phone apps: Scam calls often target seniors, and limiting them can prevent criminals from doing harm.
Protecting Older Adults From Identity Theft
Although identity theft and scams present a particular challenge for adults with dementia, they can be a problem for all older adults (and, for that matter, everyone else). It may be wise to look into placing fraud alerts or credit freezes with all three credit reporting bureaus (Experian, TransUnion and Equifax). These actions can help protect a person from identity thieves looking to open credit accounts and loans in their name.
Using identity theft protection such as Experian IdentityWorks℠ may provide additional benefits as well by:
- Monitoring credit reports and scores for all three credit bureaus. For caregivers, this also means being alerted to missed bill payments and declining credit scores that can signal cognitive changes.
- Checking for new accounts, changes of address and account takeover—all signs of identity theft.
- Reporting on court records, which can be indicators of a stolen identity.
- Providing support to uncover identity fraud and deal with the consequences of stolen identity.
Tools, Strategies and Help for Coping
Managing money and risk while simultaneously coping with dementia is a massive challenge, both for caregivers and those affected. If you're lucky enough to have a caregiver you can truly trust—or have the honor of being one—there are tools and strategies that can help make the process more workable.
If you need additional guidance, consider consulting an elder care attorney or look for local resources for caregivers in your area. Want to learn more? The National Institute on Aging offers information on legal and financial planning for people with dementia.