Financial knowledge can help people recognise fraud, but it does not provide immunity. Research shows that scammers often succeed by controlling the circumstances of a decision, using urgency, fear, excitement or borrowed trust to stop a target from checking what is really happening.
This is not a small problem. Consumers reported losing about $16 billion to fraud in the United States during 2025, around 25% more than a year earlier, according to the Federal Trade Commission (FTC). That total covers reported losses, so it does not include every victim who remained silent or did not recognise the fraud.
Imposter scams alone accounted for $3.5 billion. These schemes work because the criminal appears to be someone the target already has reason to trust, such as a bank employee, government official, established company or relative.
Knowing about fraud is not the same as recognising it
A 2026 study in the Journal of Consumer Affairs examined which kinds of financial fraud came readily to mind for American adults. Researchers asked a nationally representative sample of 1,509 people to list up to five schemes or tactics used by fraudsters.
Half mentioned identity-based fraud, such as the theft or misuse of account details and personal information. Awareness of the other categories was far lower. Threat-based fraud was mentioned by 20%, opportunity-based schemes by 17%, consumer fraud by 16% and imposter fraud by just 14%.
The researchers also gave participants three questions covering interest rates, inflation and the diversification of investment risk. People with higher financial-literacy scores were more likely to mention four of the five fraud categories. Opportunity-based fraud was the exception.
That is evidence that financial literacy and fraud awareness are related. It does not show that knowledgeable people will recognise every scam while it is happening.
Participants who mentioned threat-based fraud were less likely to report having lost money to a scam. However, the study was cross-sectional, meaning it measured participants at one point in time. The authors could not determine whether awareness reduced losses, a previous encounter made a fraud type more memorable, or another factor affected both.
As the accompanying RAND and FINRA Foundation research brief explains, failing to name a type of fraud does not necessarily mean that somebody has never heard of it. It does indicate that many common schemes are not at the front of people’s minds.
Financial literacy and persuasion literacy are different
An older investor-fraud study offers another reason to question the stereotype of the uninformed victim. It compared 165 lottery and investment-fraud victims with 150 non-victims. The investment-fraud victims tended to have higher incomes, more education and greater financial literacy.
The finding does not mean financial literacy causes victimisation, nor does it describe every victim. It shows that knowledge of investments is not the same as an ability to detect manipulation.
The study, summarised by the Stanford Center on Longevity, identified tactics including apparent credibility, promises of wealth and claims that other people were already investing successfully. Fear and friendship were also used.
A person may understand shares, bonds and diversification while paying less attention to how a proposal reached them. A convincing fraudster can use genuine terminology, real market news and apparently sensible questions before introducing the deception.
Knowledge may even make a proposal interesting enough to investigate. Someone unfamiliar with an investment could dismiss it immediately. An experienced investor may remain on the telephone, ask questions and give the fraudster an opportunity to build credibility. The research does not establish that this is why financially literate victims were deceived, but it shows why expertise alone is an incomplete defence.
Scammers change the meaning of the payment
The criminal rarely describes the requested action as handing money to a stranger.
In an opportunity-based scam, the payment may be presented as entry to an unusually profitable investment. In an impersonation scam, the same transfer can be presented as a way to save money from an attack on a bank account.
This reframing matters. The victim believes he or she is moving money away from danger, not towards a criminal.
Some of the costliest impersonation schemes begin with a bogus bank-security warning, the FTC says. In 2025, consumers reported losing nearly $1 billion to business impersonators and about $920 million to government impersonators.
Urgency helps the scammer preserve that version of events. Time allows the target to contact a bank independently, search for the supposed company, consult another person or notice a contradiction. The fraudster therefore creates a deadline, demands secrecy or warns that delay will cause a financial or legal disaster.
Trust can come from a group as well as an individual. In affinity fraud, criminals target members of religious, professional, ethnic or other identifiable groups. The person recommending the investment may also be an unwitting victim, which makes the endorsement appear sincere.
Age changes the pattern, not the need for caution
Older adults are often portrayed as the natural victims of fraud. FTC data show a more complicated picture.
In 2024, adults aged 60 and over reported losing money to fraud at a lower rate than younger adults. They also filed no-loss reports at a much higher rate, which may mean they identified more attempts or were more inclined to report them.
However, older victims reported larger losses when fraud succeeded. The FTC’s report on older consumers put their median reported loss at $900 in 2024, rising to $1,650 among people aged 80 and over. After adjusting for population size, older adults were nearly twice as likely as younger adults to report a six-figure loss.
The types of fraud also differed. Older adults were more likely to report losses from tech-support, prize, romance and government-impersonation scams, but less likely to report losses from online shopping, investment and job scams.
Age, intelligence or education therefore cannot provide a useful profile of everyone who will be deceived. Exposure, accumulated assets, the type of scam and the circumstances of the decision all matter.
A safer process matters more than confidence
The practical defence is to make an unusual financial decision harder to complete under somebody else’s timetable.
If a caller claims to represent a bank, end the call and contact the bank through a number printed on a statement, card or official website. The FTC warns consumers never to move money to “protect it” and never to give a caller a verification code.
An investment introduced by a friend or trusted group still requires independent checking. Investor.gov provides a tool for consumers to check whether an investment professional is licensed and review any disclosed disciplinary history.
A request for secrecy is another reason to stop. A second person has not been taken through the same emotional sequence and may notice what the target cannot see from inside the conversation.
The useful question is not whether somebody is intelligent enough to spot a scam. It is whether the identity, offer and requested payment can be verified without relying on anything supplied by the person asking for the money.
