This study investigated age differences in generalization of causal value employing similarity as a cue to causality. Exemplars from six food categories (A+, B-, C+, D-. E+, F-) were presented to both young and older adults in two contiguous training phases. Training Phase 1 included exemplars from categories A+, B-, C+, D-. Training Phase 2 included exemplars from A+, B-, E+, F-. Foods in the “+” categories were paired with an outcome of sickness and foods in the “-” categories were not paired with sickness. Tests of causal judgment and exemplar recognition were conducted. For causal judgment, individual exemplars experienced during training and novel exemplars from all six categories were presented. For categories A+ and B-, the categories experienced in both training phases, young and older groups generalized the causal value to the category label and to all exemplars regardless of whether they were experienced in training or were novel. For categories experienced only once in training (C+, D-, E+, F-), both groups were better able to successfully judge causal value for experienced exemplars than novel exemplars. For young and older adults, experience made a difference in the ability to generalize causal value. Experienced and novel exemplars were also presented for recognition. Participants in both age groups showed a false memory effect for individual exemplars from the more experienced categories (A+, B-) suggesting that the process that allowed them to generalize causal value also interfered with their memory for individual exemplars. There was a difference between the younger and older groups for the categories that were only experienced once in training (C+, D-, E+, F-). In this case, younger participants showed better recognition than older adults for the individual exemplars. Older adults showed the same false memory effects for these categories as they showed for categories A+ and B-. These findings suggest that older adults generalize causal value as well as younger adults, but they are less able to distinguish individual exemplars. This discrepancy may be explained by differences in ability to use verbatim and gist. Older adults’ reduced verbatim processing leads to default gist encoding that enables them to focus on category level features but not process detailed exemplar identity (Brainerd & Reyna, 1990). Younger adults appear to have a flexibility that enables them to encode and retrieve both category-level gist and verbatim individualexemplar features when the task calls for it.