If you were born after 1980, you are likely the children of one of two generations that were absolutely lousy with money. Baby Boomers and Generation X are two of the most indebted generations in the history of the U.S. The 1970’s – 1990’s saw a massive expansion of consumer credit and innovations in financial products that fundamentally changed what the middle class could ‘afford.’
Their parents (many born in the 30’s and 40’s) were children of the Great Depression. They did not have credit cards, car leases, home equity loans, adjustable rate mortgages, 0% financing, payday loans, etc. They had to save cash for what they wanted and if they couldn’t afford it, they simply went without it.
Unfortunately, we do not typically develop our money habits and behaviors from our grandparents; we typically learn money management from our parents. Whether our parents talked to us about managing money or not, we learned from their behaviors. Some studies have shown that many of our financial habits are formed by the age of seven and parents have the greatest influence. What were your early childhood experiences with money?
- Were you spoiled as a child with seemingly endless amounts of toys?
- When was the first time you were aware of money? The first time you went to a bank?
- Were you aware of lack/scarcity in your childhood? Did other kids have things you wanted but your parents couldn’t afford?
- Were you rewarded with money or toys for good grades or behavior?
- Did you have an allowance? When did you open your first savings account?
- When were you aware of how much your parents made and how that was different from your friends and classmates?
When you think back to those experiences, it may highlight some of the subconscious decisions you make with money. For example, some people resented growing up without material wealth and it is a driving force for how they present themselves to others. They may purchase items to communicate to others that they can afford expensive items (even if it causes them to go into debt). They worked hard and thus they ‘deserve’ nice things. Others may have grown up with material wealth but never learned how to manage it or accumulate it so they may simply go on living the lifestyle they are accustomed to, but their finances are struggling to support it.
So yes, you can blame your parents for not teaching you positive financial habits! However, chances are if you are reading this, you’re way too old to blame your parents for anything, ever. It’s now up to you to break those habits and create better habits for yourself and the next generation.
How can you break the cycle of bad financial habits? I’m glad you asked! Here are some questions to get you started. The more honest you are with yourself, the better.
- Do you have memories from your childhood of feeling inadequate when it came to material things (i.e. clothes, shoes, car, home)? How does that affect how you spend money? Are you trying to prove yourself or get validation of being “successful” by spending?
- What are your default behaviors, values, and attitudes with money? For example, what did you do the last time you received an unexpected sum of money (bonus, tax return, student loan disbursement, birthday gift)?
- What are your current giving and saving habits? Do you save or give with what’s left over or do you prioritize it before spending?
Personal finance is indeed personal. It can be as much or more about your values, experiences, and emotions than dollars and cents. If you want to change your money habits, understand the why behind some of your choices. Once you understand the why you’ll be well on your way to creating better habits.