What childhood “money story” is shaping your financial behaviors?

It’s no secret that the values, advice, and experiences we encounter as children shape how we relate to other people later in life. But less obvious is how our early experiences shape our relationship with money. Like other relationships, the ways we interact with money — whether it be spending, saving, or investing — can be highly emotionally charged, sometimes to the extent that we lose our control to make smart financial decisions.

That’s why it’s important to understand where you come from before plotting where you’re going when it comes to personal finance. Doing so will not only help you plan for financial success, but it will also give you the tools to help your children develop a healthy and positive relationship with money.

“The biggest thing that parents can do to help their children make better financial decisions in the future is talking to them about their personal financial decisions now in the present,” Steven M. Hughes, a financial therapist, told Big Think. 

Watch our full interview on money trauma:

Money stories 

As children, we slowly begin telling ourselves a “money story” — a term some psychologists use to describe all the personal feelings, values, and beliefs we hold about money. These stories can be shaped in subtle ways. 

One example comes from the wealth psychologist Kathleen Burns Kingsbury, who as a young child was asked by her mother to go buy milk at the nearby store. She accepted some money from her mother and went to the store. Upon returning home, Kingsbury gave her mother the milk but opted to keep the nickel of change in her pocket. 

She got in trouble.

“What I walked away with was, my love of money is shameful — that there’s something wrong with my desire to hang onto this nickel that is not okay,” Kingsbury told Big Think. 

“As an adult, what is interesting is that I’ve always been good at managing the money, making money. But my love of money, my desire as an entrepreneur to be profitable, actually I had to work through some of that shame and discomfort, I think, because I was sent the message [that it was not okay to desire money].”

It’s easy to imagine how other life experiences could shape our money stories. A grandmother who grew up during the Great Depression might be extra scrupulous with using coupons at the grocery store due to childhood memories of food scarcity. An immigrant to the U.S. might not invest money because the banks in his home country weren’t trustworthy. Or your friend that tends to avoid personal-finance issues might do so because his parents always used to argue about bills and debts, so now money is associated with a constellation of negative feelings. 

Psychologists have studied these kinds of patterns of belief that we hold about money. Studies have uncovered four broad patterns — called “money scripts” — that can serve as a helpful framework for understanding the particular ways you and your family relate to money. As Big Think described in a previous article, these scripts include:

Money avoidance: This pattern describes a general belief that money is bad. People who score high in this category might believe that there’s virtue in living without money, that wealthy people are greedy or otherwise immoral, or that they don’t deserve money themselves. This group might also have trouble with overspending and sticking to a budget.

Money worship: As the opposite of money avoidance, money worship is where people put money on a pedestal, believing it fuels happiness and solves most of life’s problems. People in this group tend to be younger, have a relatively low income and net worth, and carry credit card debt. 

Money vigilance: This tends to be the money script of the ultra-wealthy. People in this group value a bargain. They usually don’t spend above their means, placing an emphasis on protecting their capital. But while saving and frugality can be positive, an excess of vigilance may lead people in this group to suffer financial anxiety or a reluctance to ever spend it. 

Money status: This is where people equate their self-worth with their net worth, financial psychologist Dr. Brad Klontz told Big Think. People in this group like outwardly displaying their wealth, and they’re more likely to spend too much, gamble, and be financially dependent on others.

Crafting a positive money story for your children 

When it comes to imparting a healthy money story to your children, one of the best things you can do is to first get a clear, honest appraisal of your own relationship money. 

That could be a tall order. After all, not only is it difficult to untangle exactly how your personality traits and life experiences have shaped your money story, but also personal finance is a complex subject and many people could stand to improve their financial literacy, considering that only 57% of U.S. adults are financially literate, according to the Milken Institute. Ultimately, understanding your relationship with money can help you better model healthy financial behaviors around your children.

In terms of directly teaching your kids about money, it’s better to start early. Keep it simple at first, offering lessons that are appropriate for your child’s age. Kingsbury told Big Think that parents might consider teaching a 5-year-old how to handle money and make change, while older kids preparing for their first job might benefit from lessons on how to negotiate pay. 

Even though personal finance has tangible effects on our everyday lives, it can seem like an abstract concept. Dr. Klotz advised keeping advice simple and concrete. It helps to be aware that specific situations you’re going through with your children might be good opportunities to encourage healthy money habits. 

As Kingsbury told Big Think:

“The more you do it, the more you’ll see these opportunities arise, and I think those natural financial conversations and those teachable moments are great ways to be able to express your family values, to teach your kids about money, and to do so in a way that’s a little bit more palatable.”