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12 Unexpected Ways Your Childhood Affects Your Financial Future

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By Alessia Barranca

Frugal Feature

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While our childhood is centered around going to school and socializing with friends, it is when we soak up the habits of the adults around us. Seeing how our parents and loved ones manage their finances can affect our future. We look at 12 ways our childhood influences our future finances, from thinking that money comes easily to the importance of giving back.

The “Money Tree” Myth

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For children with parents who readily provide for their needs without question, it is easy to grow up thinking that money grows on trees. Limitless money feels excellent at the time, but when children are raised this way, it can prevent them from understanding the actual value of money. With an open conversation about the importance of earning money and responsible spending, children may grow up with a good work ethic and not become irresponsible spenders.

Instant Gratification

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When parents readily fulfill every desire, a culture of instant gratification is fostered. Children raised this way may struggle with impulse control and delayed gratification, leading to poor financial decisions like excessive credit card debt and an excess of loans. The health approach is for parents to show their children how to be patient by encouraging them to save for what they want and teaching them the value of delayed gratification.

Family Debt

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Growing up in a household burdened by debt or financial instability can create anxiety and negative attitudes towards money. Children from such backgrounds might avoid taking financial risks, hindering career growth or entrepreneurial pursuits. To avoid the cycle of financial stress, open communication about financial challenges can help normalize the situation and encourage children to develop healthy coping mechanisms.

“Keeping Up with the Joneses” Mentality

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Parents who prioritize keeping up with appearances or competing with neighbors financially can profoundly affect their children. Children growing up in a home with a stressful environment due to overspending might develop unhealthy spending habits and materialistic values, leading them to be in and out of debt in adulthood. Instead, parents should emphasize the value of experiences over possessions and encourage children to focus on making themselves happy rather than booking for validation elsewhere.

The Importance of Role Models

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Parents with responsible financial habits like budgeting, saving, and intelligent investing can positively affect their children. Children of financially responsible parents are more likely to adopt similar habits, leading to greater financial security in their own lives. Parents can teach financial literacy by openly discussing financial decisions and involving children in an age-appropriate way, leading by example at every step.

The Language of Money

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A household where money is taboo can lead to secrecy and shame surrounding finances. Children raised this way may need more financial literacy and help to make informed financial decisions as adults. Open and honest communication about money matters is crucial to prevent these struggles. Parents can use everyday situations as teachable moments to explain financial concepts clearly and age-appropriately. This can often mean letting children know when something is not affordable, such as a vacation or lots of presents on the holidays.

The Value of Saving

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If children grow up in a home where saving is not prioritized, or the concept must be explained to them, it can hurt their future spending. There is a risk that children will not be motivated to save or plan for their future. Children should be encouraged to save from a young age, even with small amounts. Parents can help them by setting savings goals, even as small as putting a few cents into a piggy bank and celebrating milestones to foster a positive association with saving.

The Impact of Allowance

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Not receiving an allowance or having opportunities to earn money as a child can limit financial literacy and the understanding of money management. Children who don’t handle their own money may need more budgeting skills and struggle with financial responsibility as adults, especially if they do not learn about money at school. Adults should consider providing an allowance or age-appropriate ways for children to earn money, for instance, washing the car or cutting the lawn. This allows them to practice budgeting, saving, and, ultimately, responsible spending.

The Importance of Charitable Giving

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Witnessing parents who donate to charity or volunteer their time can instill the value of giving back. Children who witness their parents showing care for others rather than indulging in themselves all of the time can develop essential traits such as kindness and empathy. For younger children, parents can involve them in simple acts of kindness, such as donating used toys or clothes to a local shelter or participating in a charity walk or run together.

Cultural and Societal Messages

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Our financial habits are shaped by personal experiences and the broader messages we receive from society. In Western cultures, for example, there’s a strong emphasis on individual achievement and accumulating wealth. This relentless pursuit of money can sometimes overshadow other essential aspects of life, leading people to prioritize financial gain over building solid relationships. Parents need to discuss the impact of society and over-consumption so that they can focus on personal growth rather than just wealth.

Socioeconomic Status

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Our socioeconomic status during childhood plays a significant role in shaping our money mindset. Children raised in lower-income families might develop a scarcity mentality, where financial insecurity and a feeling of never having “enough” become ingrained. This can lead to difficulty saving, excessive budgeting, or even a reluctance to pursue opportunities that require financial investment. For children who come from wealthy households, they must be taught that others are less fortunate than themselves.

Traumatic Experiences

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Traumatic experiences related to financial instability in childhood, like poverty or witnessing parental struggles, can leave lasting emotional scars. These experiences can lead to the development of money trauma, a deep-seated fear of financial insecurity, or a belief that achieving financial stability is simply out of reach. By acknowledging the impact of their childhood experiences and seeking professional help, children can break free from this way of thinking.