" I should know better" : I hold on to dreams, ideals and fantasies, but I am old enough to know that these are mainly illusions. I have had enough experience to know that many of the things I hope for, many of the things I want to believe in, just do not happen that often. A child might believe in Father Christmas as a literal truth. By a certain age, she is "old enough to know better". She knows it is just a story we tell each other. Addition: "I should" in this usage means "I ought to". See definition 4 in the 2nd Merriam-Webster link. "Should" can be used to express what is probable or expected: by her age, the writer feels that it would be expected that she know better. https://www.merriam-webster.com/dictionary/know%20better https://www.merriam-webster.com/dictionary/should

criticizing someone's actions, the writer is not happy with the choices they made.