By the time dementia becomes visible in daily life, the financial consequences may already be well underway.
Years before a diagnosis, subtle changes in memory and judgment can begin to interfere with how people manage money—missing a payment, overlooking an account, or failing to respond to market shifts. These early lapses are often dismissed as ordinary forgetfulness. But over time, they can compound into significant financial losses, leaving households more vulnerable just as the costs of cognitive illness begin to rise.
Jing Li, Associate Professor and Associate Director of the CHOICE Institute, and faculty member of the Plein Center for Aging, studies this long, largely invisible period before cognitive decline is clinically recognized. Her research—published in JAMA Neurology and by National Bureau of Economic Research—shows that financial decision-making often deteriorates well before dementia is diagnosed, quietly eroding household wealth at a moment when families are least prepared to absorb the loss.
“We all know dementia has serious consequences for health and health care,” Li said. “But the financial aspects are much less understood—especially what happens before people develop full-on dementia.”
A Slow and Quiet Decline
Cognitive decline does not begin at diagnosis. It unfolds gradually, sometimes over decades, affecting memory, attention, and executive function long before dementia is formally detected.
“The decline is a very long process,” Li explained. “Even before dementia becomes clinically detectable, something is already going on in the brain. Decisions can start to get impaired without the person knowing—and often without other people, such as family members, knowing.”
During this period, most people continue handling finances as they always have (paying bills, managing checking accounts, and overseeing investments that may have taken a lifetime to build). Older adults also tend to hold a large share of household wealth, making the consequences of even modest errors more serious.
Small lapses often come first. A forgotten bill payment can trigger late fees or penalties. Repeated mistakes can snowball into credit problems or mounting debt. More complex assets, such as stocks or investment accounts, pose even greater risks.
“For assets that need to be actively managed, we see a really clear, large drop in value,” Li said. “Even inattention—just not knowing when to buy or sell—can lead to substantial wealth loss.”
Vulnerability to Fraud and Exploitation
Cognitive decline can also make older adults more vulnerable to financial exploitation. Even cognitively healthy older adults are disproportionately targeted by scams. For those experiencing memory or judgment impairments, the risks increase sharply.
“They may feel more generous, more trusting, or less able to evaluate whether something makes sense,” Li noted. “And it’s not always strangers. Sometimes the perpetrators are people within their own family.”
The true scale of financial exploitation is difficult to measure. Many victims never realize they have been scammed. Others may feel ashamed or reluctant to report losses. As a result, available data likely understates the scope of the problem.
What researchers can document, however, is a consistent pattern: wealth begins to decline well before dementia is diagnosed, and financial decision-making appears to play a central role.
Who Faces the Greatest Risk
Risk is not evenly distributed. Older adults who live alone are particularly vulnerable, in part because there is no one nearby to notice subtle changes or intervene early.
“If you live alone, there’s no one looking over your shoulder,” Li said. “That makes it much easier for mistakes to go unnoticed.”
This is where communities, health systems, and financial institutions may have an important role to play. Routine cognitive screening during annual wellness visits can help identify early impairment. Even brief conversations about memory or decision-making can prompt earlier planning.
“Health care providers can’t do everything,” Li acknowledged. “But even talking about these risks and referring patients to other resources—like social workers—can be hugely helpful.”
Some financial institutions have begun exploring safeguards, such as flagging unusual transactions, simplifying account options, or allowing trusted contacts to monitor accounts when concerns arise.
“I’ve actually been approached by financial institutions wanting to understand this problem better,” Li said. “Many recognize there is a real risk when clients are in that early, pre-dementia stage.”
Planning Before It’s Too Late
For individuals and families, timing is critical. Once cognitive decline becomes apparent, it may be difficult—or impossible—to put protections in place.
“People need to be prepared before things go wrong,” Li said. “Once they do, it’s sometimes too late.”
Proactive steps can include designating trusted financial contacts, establishing durable powers of attorney, and considering financial products that provide stable income without requiring ongoing decisions. Simpler, lower-risk arrangements can offer security when decision-making capacity diminishes.
At the policy level, Li sees opportunities for broader intervention. Strengthening consumer protections against fraud, improving financial literacy, and expanding access to fiduciary services could all reduce vulnerability.
“There’s a larger role for policymakers,” she said, pointing to early detection, consumer protections, and support from agencies such as the Consumer Financial Protection Bureau. “This really requires action at multiple levels.”
A Universal Risk
Perhaps the most sobering message of Li’s research is that cognitive decline is not a niche concern. It is a risk every household faces.
“No one can guarantee they won’t develop dementia in the future,” she said. “Because it can be such a long process, you really need to start taking action early.”
Protecting household finances from dementia, Li argues, requires the same mindset used in preventive health: planning ahead, accepting uncertainty, and building resilience before a crisis occurs.
“Good policy planning and product design,” she said, “can make households more resilient when the risk hits—even though we don’t know when that will be for any given individual.”
What Families Can Do
- Talk early: Begin conversations about finances and decision-making long before problems appear.
- Designate a trusted contact: Many banks allow clients to name someone who can be alerted if unusual activity occurs.
- Set up legal protections: Establish durable powers of attorney while decision-making capacity is intact.
- Simplify finances: Consolidate accounts and reduce reliance on complex, actively managed investments.
- Watch for warning signs: Missed bills, unusual purchases, or sudden generosity may signal cognitive changes.
- Use routine screenings: Encourage cognitive screening during annual wellness visits.
- Ask for help: Social workers, financial advisors, and community organizations can provide guidance and oversight.