Learning — and unlearning — money lessons from childhood

Courtesy of Amy Berk, Financial Adviser, Ameriprise

If you suddenly received a windfall, would you take a trip around the world? Buy a luxury car? Save it for retirement? Surprise! Your answer may be greatly influenced by your parents and grandparents.

Experts say how we handle money and what it means to us has a lot to do with how you were raised. “Each person has a family history when it comes to money that’s rooted in generations of experience,” says Lori Sackler, CPA, CFP, CIMA and author of The M word: The money talk every family needs to have about wealth and their financial future. In extended families, she says, you can see recurring themes and patterns regarding how people think about money as well as the choices they make.

Whether or not we realize it, money carries with it powerful emotional meanings. For some people, accumulating wealth satisfies a need to communicate power and status, for others it’s security and for others it’s a ticket to excitement and adventure. “Most of the time, this story is an unconscious part of who we are because it’s been nurtured early in childhood and woven into the fabric of the family,” says Sackler.

A family’s cultural style often falls into one of four categories, or a blend of two, says Arne Boudewyn, head of family dynamics for Abbot Downing, a Wells Fargo company. They can be loosely described as:

  1. Cautious/conservative: This family takes risk management very seriously. Typically analytic in their decision-making, they need lots of information and will move slowly and cautiously in considering major wealth-related decisions. They have a tendency to watch every penny.
  2. Stable/reliable: Steady as you go, this family craves equilibrium and homeostasis. They are likely to avoid or resist situations requiring rapid change. Decisions are made to maintain the status quo. They honor tradition and continuity but may look askance on individuals who stray from the mold.
  3. Extroverted/interpersonal: With a culture that focuses on relationships, this family cherishes harmony, fostering connections and nurturing others. They may not pay as much attention to the specific details surrounding wealth-related decisions and are often less inclined to adhere to rigid structures and processes where family finances are concerned.
  4. Dominant/entrepreneurial: This family is focused on results and outcomes. They have strong opinions and prefer to make wealth-related decisions based on high level details and move quickly when convinced of a direction. They will reflexively operate to maintain power, control and autonomy.

But, that doesn’t mean we automatically fall in line with our parents. In fact, one of two things happens — either people tend to mimic their parents and the dynamic they were raised in or they do the complete opposite. For example, if you have frugal parents raised post-Depression, then you may also tend to monitor daily expenses closely — or you may buy whatever you want, when you want it. And, if there’s conflict between two parents who themselves came from dramatically different money styles, that can drive people to affiliate more closely with one parent.

People tend to mimic their parents and the dynamic they were raised in — or they may do the complete opposite.

When we know our family background and how it influences our behavior then we can make choices to change our behavior or avoid destructive patterns. Let’s say you commonly get into fights with your spouse over how much to spend on a computer or whether to take the bus or a cab. If you come from a family that just scraped by and you take the time to understand the source of your behavior, you might be able to see it in perspective. Then you can decide to take a deep breath and avoid the conflict.

Being aware of these patterns also helps us to transmit the values we want to pass on to our children and grandchildren. “In every generation, parents and grandparents want their offspring to be responsible, motivated and contributing members of society,” says Boudewyn. Involving younger family members in the thought process around money decisions can help them learn to become good stewards of their own resources.

“Until we understand our family money background, we may not be able to take charge of our own financial destiny,” says Sackler. Getting the facts out in the open is an important step. “Money is often a taboo topic in families — how it’s made, how much there is, what it’s spent on and who it’s going to,” she says. Having these conversations helps people adjust their behavior and change the family culture that may span generations.

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