The True Cost of Being Broke: How Childhood Money Issues Affect Our Adult Finances

Living in poverty or struggling financially can have a significant impact on our mental and emotional well-being. Financial stress can be a constant source of worry and anxiety, leading to physical symptoms such as headaches, difficulty sleeping, and even depression. The psychological effects of financial insecurity can also affect our relationships, making it harder to maintain healthy connections with others. Additionally, the stigma and shame associated with being broke or living in poverty can be isolating, making it harder to reach out for help and support.

The Traumas of Poverty 

Growing up in poverty can be a traumatic experience, and it can have long-lasting effects on our relationship with money. Children who grow up in low-income households may experience chronic stress, inconsistency and often receive mixed messages when it comes to morality.

Parents play a crucial role in instilling moral values in their children, but in the face of financial difficulties, they may struggle to live up to the standards they teach. For instance, parents may teach their kids that stealing is wrong, but they may resort to stealing food when they can't afford to buy it.  Similarly, parents may preach honesty and integrity but ask their kids to lie to debt collectors or pretend that they are not at home when the repo man comes knocking. Such actions not only contradict the values they are trying to instil but also expose children to a range of negative emotions and experiences, including fear, shame, and guilt. 

These experiences can create negative patterns of behaviour that persist into adulthood, such as impulsive spending, hoarding, or avoiding financial responsibilities altogether. 

Growing up in poverty can also have a significant impact on a child's social development and emotional well-being. One of the most significant issues that children from low-income households may face is social exclusion. For example, children may not be able to afford to have or go to birthday parties, go on school trips or participate in extracurricular activities that their peers can easily afford. This can result in children feeling left out, different, and embarrassed, eventually leading to low self-esteem and poor self-image. Additionally, children from low-income households are more likely to be bullied for wearing old clothes or not having the latest gadgets or toys. This can further reinforce feelings of shame and inadequacy, and negatively affect their social and emotional development. In adulthood, these emotions can create a cycle of self-destruction, where individuals sabotage their own financial success due to feelings of unworthiness.

Other examples of financial trauma in childhood can include witnessing parents arguing over money, experiencing sudden changes in financial status, or feeling a lack of control over financial decisions that affect you, especially in the case of caregivers with addictions such as gambling or alcoholism. A caregiver withholding or spending money you should legally have access to can also be a form of financial abuse that leaves trauma that might follow you into adulthood.

The Power of Avoidance

For many people, money is a source of stress and anxiety. But for those who have experienced financial hardship, money can be an especially fraught topic. When we face financial struggles, it's natural to feel overwhelmed and unsure of where to start. But for many people who have experienced poverty, the stress and anxiety can be so overwhelming that they avoid dealing with their finances altogether. This avoidance can take many forms, from ignoring bills and debt collectors to avoiding conversations about money with friends or family. 

Avoidance can be a powerful coping mechanism, providing a temporary sense of relief from the stress and anxiety of financial struggles. But in the long run, avoiding our finances can make the situation worse, leading to more debt, missed payments, and an overall sense of powerlessness and hopelessness.

Children who grow up poor often have a difficult time talking about money. This is because they may have experienced embarrassment or shame when discussing financial issues with others. As a result, they may associate talking about money with these negative emotions and avoid discussing financial matters altogether. This can be especially challenging as they grow older and need to start managing their own finances. They may feel a sense of reluctance or discomfort when discussing money matters, which can lead to missed opportunities for financial growth or mismanagement of funds. It's important for parents and caregivers to create a safe and non-judgmental space for children to discuss their financial concerns and questions, without the fear of being shamed or embarrassed. By doing so, children can develop healthy financial habits and beliefs that will serve them well throughout their lives.

Understanding Financial Avoidance

To overcome financial avoidance, it's important to understand why we engage in these patterns of behaviour in the first place. For many people who have experienced poverty, financial avoidance is a way of protecting themselves. They may feel like they've failed, or that they don't deserve to have financial stability. Avoiding their finances can be a way of avoiding these negative emotions.

Tips for Overcoming Financial Avoidance

If you're struggling with financial avoidance, there are some steps you can take to start building a healthier relationship with your finances:

1. Acknowledge your emotions: It's important to acknowledge and accept the negative emotions that come with financial struggles. This can be difficult, but it's an important first step in overcoming avoidance.
2. Seek support: Reach out to a trusted friend or family member, or consider seeing a mental health professional. Having someone to talk to can make a big difference in overcoming avoidance.
3. Break tasks down: Instead of trying to tackle everything at once, break down financial tasks into smaller, manageable steps. This can help make the process feel less overwhelming.
4. Use tools and resources: There are many tools and resources available to help you manage your finances, such as budgeting apps and debt counselling services. Don't be afraid to reach out for help.
5. Practice self-compassion: Remember that your financial struggles do not define your worth as a person. Practice self-compassion and be kind to yourself as you work through these challenges.

Overcoming childhood money issues requires a combination of self-reflection and practical strategies. Here are some steps you can take to break the cycle and build a healthier relationship with money:

1. Reflect on your past: Take some time to reflect on your childhood experiences with money. What messages did you receive from your caregivers? What patterns of behaviour did you develop in response?
2. Identify your triggers: What situations or events tend to trigger your anxiety or shame around money? Identifying these triggers can help you develop coping strategies to manage them.
3. Develop a budget: Creating a budget can help you take control of your finances and reduce anxiety around money. Start by tracking your expenses for a month, then identify areas where you can cut back or save.
4. Challenge negative beliefs: If you find yourself struggling with feelings of inadequacy or guilt around money, challenge these negative beliefs. Remind yourself that your worth as a person is not defined by your financial situation.
5. Seek support: Consider reaching out to a therapist or financial counsellor for support. Talking to a professional can help you develop a plan for overcoming your childhood money issues and building a healthier relationship with money.

Childhood money issues can have a lasting impact on our adult finances, but it's never too late to break the cycle. By reflecting on our past experiences with money, identifying our triggers, and developing practical strategies for managing our finances, we can start to build a healthier relationship with money. Remember that financial stability is a journey, not a destination, and that it's okay to ask for help along the way. With patience, self-compassion, and a willingness to learn and grow, we can break free from the patterns of behaviour that hold us back and build a brighter financial future

Passing The Financial Torch

■ Americans raised at the bottom and the top of the family income ladder are likely to remain there as adults, a phenomenon known as “stickiness at the ends.”  ■ Sixty-six percent of those raised in the bottom of the wealth ladder remain on the bottom two rungs themselves, and 66 percent of those raised in the top of the wealth ladder remain on the top two rungs.■  Only 4 percent of those raised in the bottom quintile make it all the way to the top as adults, confirming that the “rags-to-riches” story is more often found in Hollywood than in reality. Similarly, just 8 percent of those raised in the top quintile fall all the way to the bottom. ■ 

Parents who are financially stable are more likely to teach their children money management skills simply because they have the resources and knowledge to do so. They may have been raised in households where financial literacy was valued, or they may have learned through trial and error as they navigated their own financial journeys. Either way, they are in a better position to pass on this knowledge to their children.

On the other hand, parents who struggle financially don’t have the same resources or knowledge to pass on. They may have grown up in poverty themselves and never learned basic financial skills, or they may have experienced financial trauma that makes it difficult for them to deal with their own finances, let alone teach their children. This can create a cycle of generational poverty and financial instability that is difficult to break.

It's important to recognise that financial literacy is not just about managing money - it's also about understanding the systems and structures that shape our economic lives. Children who grow up with an understanding of financial literacy are better equipped to navigate the complex world of personal finance, and are more likely to be financially stable in adulthood. Children who learn basic money management skills such as how to save, invest and budget effectively are better equipped to make their money work for them as they grow older. They are more likely to understand the value of saving and investing for the long-term and may be more likely to make smart financial decisions, such as avoiding high-interest debt or taking advantage of tax-free savings opportunities.

In addition, children who learn about financial literacy are better equipped to navigate complex financial systems, such as the process of applying for mortgages, loans or credit cards, and may be more likely to secure favourable interest rates and terms. This is because they have a better understanding of the factors that influence credit scores and lending decisions, and can take steps to improve their own financial standing.

On the other hand, children who do not learn these basic money management skills may struggle to make the most of their money, even if they do manage to acquire it later in life. They may be more likely to fall into high-interest debt or make poor financial decisions due to a lack of understanding or knowledge.

Manifestations Of Financial Education In Adulthood

Adults with little or no financial literacy may display several poor money habits, such as living paycheque to paycheque, overspending on unnecessary items, neglecting to save for emergencies or retirement or carrying high-interest debt. In addition, they may neglect paying bills on time, leading to late fees and damage to their credit score. They may also rarely (or never) check their credit report or take any steps to improve their credit score. Other unhealthy money habits that can result from a lack of financial skills include impulse buying, not negotiating bills or contracts, and falling for financial scams or predatory lending.

Adults without good financial management skills may also use money to deal with emotional issues such as sadness or stress. This can lead to unhealthy spending habits, such as compulsive shopping, impulse purchasing or relying on credit cards. The instant gratification of making a new purchase or the rush that comes with a shopping spree may temporarily alleviate feelings of sadness, but in the long run, it can lead to financial stress and debt. The psychology of buying is a powerful force, as it can activate the reward centre in our brains, releasing dopamine and causing us to feel good in the moment. This can create a cycle of impulsive spending and emotional reliance on shopping as a coping mechanism, ultimately causing more harm than good in the long term. It's important to address the underlying emotional issues that lead to this behaviour and seek healthier coping mechanisms that don't involve overspending or accumulating debt.

Growing up in poverty can also cause individuals to develop negative self-worth and feelings of inadequacy, which may lead them to seek validation through material possessions. This can manifest in the form of buying expensive items, such as designer brand clothing or expensive cars, even if it means stretching their finances beyond their means. These purchases can create a temporary sense of satisfaction and boost self-esteem, but the long-term financial consequences can be detrimental. For some, the desire to display wealth may also stem from a need to fit into certain social circles or to be seen as successful. However, it's important to recognise that true financial stability is often invisible and comes from wise financial decisions and long-term planning, rather than hoarding material possessions.

Overcoming Financial Trauma

In conclusion, overcoming financial trauma and building a foundation for financial success requires a combination of self-awareness, education, and practical skills. It's important to take the time to understand your personal financial triggers and traumas, whether through therapy or journaling, so that you can identify and overcome negative patterns of behaviour that may be holding you back.

Having a good understanding of financial skills such as budgeting, saving, and investing is crucial for long-term financial success. It's important for adults to take the initiative to learn these skills, whether through reading books or articles, taking classes, or working with a financial advisor. Some individuals may feel overwhelmed or intimidated by the idea of tackling their finances, but taking small steps and setting achievable goals can make a big difference over time. With dedication and commitment, anyone can improve their financial literacy and create a more stable financial future.