Its never too late...
What is the average age of reason? Guess it (and let me know below)
I hear this every week, in some form. A reader in their 40s tells me they wasted their 20s. A student tells me their parents “ruined” them by not teaching money early. A friend says he’s 15 years behind because he only started investing at 38.
They’re all repeating a myth.
And it’s costing them years of progress they could be making right now.
The myth is simple: if you didn’t learn money young, you’re permanently behind. The top 10% who “get it” by 30 have a head start you can never close. Game over, just manage the damage.
I believed a softer version of this myth too, until I looked at what the actual research says about when people make their best financial decisions.
Here’s what’s actually true.
In 2009, four economists, Sumit Agarwal, John Driscoll, Xavier Gabaix, and David Laibson, published a paper with an unusual title: “The Age of Reason: Financial Decisions Over the Lifecycle.” They studied real financial choices across the population: credit card terms, mortgage pricing, interest rate mistakes, all the small decisions that quietly cost or save people money over a lifetime.
Their finding surprised a lot of economists. Financial decision-making doesn’t peak young. It doesn’t peak at 30, when the “top 10%” supposedly locked in their advantage. It peaks at 53.
Financial ability peaks at 53 (and minimizes financial mistakes)
Their model puts the mean “age of reason”, the point where experience and raw analytical sharpness cross paths and produce the fewest costly financial mistakes, at 53.3 years old.
Before that age, you’re still building the experience. After that age, cognitive decline slowly starts outpacing what experience can offset. Fifty-three is the sweet spot in the middle.
Read that again. The 22-year-olds who “get it early” aren’t at their peak. They’re decades away from it.
So why does the myth persist? Because we confuse starting early with knowing early. Someone who opens an investment account at 22 gets more years of compounding, that part is true and it matter. But compounding is math, not judgment. The research isn’t about how much money you’ll have. It’s about how good your decisions are at any given moment, regardless of your starting line.
There’s a darker side to this too, worth naming honestly. Financial literacy scores fall by roughly 1 percentage point for every year past age 60. But confidence in financial decisions doesn’t fall with it. People in their 60s and 70s often feel just as sharp as they were at 50, even when their actual judgment has quietly declined. That gap between confidence and capability is where a lot of real financial damage happens later in life, not in the “wasted” 20s people beat themselves up over.
So here’s the rule I actually live by, and the one I’d want you to take from this.
The Reason Clock. Your financial judgment isn’t fixed at whatever age you “should have” started. It’s still climbing for decades. If you’re 35 and feel behind the mythical top 10%, you have almost 20 years of judgment still ahead of you, before the line even starts bending down. If you’re 55 and worried you missed your peak, you’re closer to it than most 25-year-olds will ever be.
What this means practically:
1. Stop measuring yourself against a 30-year-old’s head start. Compounding rewards time in the market. Judgment rewards time living. You need both, and only one of them is capped by when you started.
2. Build a system now, not a redemption arc. The people who “catch up” aren’t doing anything dramatic. They automate savings, they simplify to a few accounts, they stop making emotional trades. Ordinary systems, applied consistently, close most of the gap that panic convinces you is permanent.
3. Watch confidence more than you watch age. If you’re over 55, the real risk isn’t that you’re too old decide well, it’s that you’ll trust your gut exactly as much as you did at 45, in a decision where your gut has quietly gotten worse. Slow down the big ones. Get a second opinion on the ones with a lot of zeros.
4. Teach the clock, not the myth, to your kids. Tell them the truth: their best financial year is not their first paycheck. It’s decades away, and every year between now and then is still useful.
I think about my own daughter and what I want her to actually believe about money, not the sanitized version, the real one. Not “learn it now or you’re behind forever.” Something closer to: learn the basics now so the next forty years of practice have something to build on. The goal isn’t to win by 30. It’s to still be sharpening the tool at 53.
If there’s one thing you learn from me, this is the one: the finish line everyone imagines at 30s, 40s, 50s, 60s, 70s or more doesn’t exist. The real one is further out, and you’re probably closer to it than the myth wants you to believe.
Action This Week: Pick the one financial decision you’ve been avoiding because you feel “behind.” Make it this week, imperfectly. You have more good decision-making years ahead of you than you think.
My 2 cents. Late doesn’t mean lost. It means you’re still early on the part of the curve that actually matters.
P.S. If you’re past 53, do one thing this week: ask someone you trust to sanity-check your next big financial move before you make it. Not because you’ve lost your edge, but because confidence and capability quietly stop moving together right around now, and a second pair of eyes costs you nothing. There is always an exception to the rule; Warren Buffett, at 95, is one exception. What is your age of reason? More or less than 53?
Want the full framework behind building money systems at any age? Grab the Free psychology playbook here:
Best,
Balsa 🐇
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October 31, 2024 | Emanuel Balsa
not a subscriber?
Join +35,000 creators unf*ck the Matrix while discovering how deep the rabbit hole goes in work, wealth, and well-being.
When you join, I'll send you the Acceptance Assessment checklist to reset your mindset about your life.
