You got your sense of humor from your mom and your good looks from your dad, but you may have inherited something else from your parents – your problems with money. Bad financial habits often run in the family, as parents pass along their attitudes about debt, saving, and spending to their kids, sometimes unwittingly.
Forty-four percent of Americans surveyed by the National Foundation for Credit Counseling (NFCC) said they learned most of their financial lessons from their parents. Yet in a separate NFCC poll, 44% also said they’d never considered whether there was a link between their parents’ financial habits and the way they handled money. Just 12% said their parents’ money mistakes caused them to adopt financial habits that were the opposite of Mom and Dad’s.
“Whether parents are astute money managers or woefully lacking in financial skills, their behavior influences what the children are learning, and likely impacting how they will handle their own finances as adults,” Gail Cunningham, spokesperson for the NFCC, said.
In other words, if you grew up in a household where instant gratification was the norm, you may find yourself succumbing to impulse purchases as an adult. If money was always tight when you were a child, you might splurge on luxuries as an adult to make up for feeling deprived as a kid. If your parents never talked about money, you might have difficulty having financial conversations with your own partner. And that’s to say nothing of the financial advantages or disadvantages you inherit as the child of rich or poor parents.
“[M]any of us have an emotionally charged relationship with money, which is shaped very early on in our lives,” financial psychologist Brad Klontz told Morningstar. “We typically learn from our parents and grandparents what money is, what it means, how to deal with it, and how to feel about it.” In his research, Klontz has found a link between the financial messages people hear as children and their later beliefs about money. Someone who was raised in a family where wealth was associated with greed is more likely to have a lower income and net worth as an adult, for example.
How long does it take kids to learn to mimic Mom and Dad’s approach to managing money? Not long. Most of our money habits are formed by age 7, a study by Cambridge University researchers found. So, yes, feel free to be a little mad at your parents for failing to teach you the right money lessons as a kid. They may be partly to blame for your current struggles with credit card debt or difficulty saving. Meanwhile, your lucky friends who were raised in homes where financial literacy was a priority are probably watching their bank account balances soar.
The money culture you were raised in has such an impact on your adult financial habits that some financial advisors make it a point to ask questions about it when they meet with you. For them, understanding the financial lessons a person learned in their formative years is as important as looking at their 401(k) balance and credit card statements.
“I ask them to recall how they grew up with money. I want to understand how they learned about money, how money values were communicated to them,” Jim Stoops, now with Carlyon Family Wealth Management, told the Chicago Tribune. Realizing what drives financial missteps like overspending or investing too conservatively can help people eventually break those bad habits.
“Until we understand our family money background, we may not be able to take charge of our own financial destiny,” Lori Sackler, the author of The M Word: The Money Talk Every Family Needs to Have About Wealth and Their Financial Future, told Ameriprise Financial.
Still, you can’t lay the blame for all your dumb financial moves at the feet of Mom and Dad (even those who had the best teachers can still make money mistakes, after all). Being raised in a home where finances were shaky isn’t a blanket excuse for your own money management errors. Once you recognize your own bad financial habits, you can take responsibility for educating yourself about financial matters and changing your approach to money. You may even be able to break the cycle of bad financial behavior and give your own kids the leg up you didn’t have.
“By getting accurate, unbiased knowledge and advice, people can feel empowered and confident in their personal finance decisions,” AJ Smith, vice president of content strategy and managing editor of SmartAsset told Go Banking Rates. “They can then take steps to make a better financial future.”