How past ghosts can affect your finances

Experts

Childhood trauma can affect your finances, especially at Christmas.
Child playing with coins. Changing your relationship with money will take a conscious and consistent effort.
Changing your relationship with money will take a conscious and consistent effort. | Image source: Getty Images

Christmas can be a challenging time for many – both emotionally and financially. It can force us to be in the presence of people that trigger us or bring up painful memories. It can cause us to spend more than perhaps we otherwise would. And it can amplify our feelings of rejection or isolation.

You may have already heard that experiencing financial trauma in childhood affects your relationship with money as an adult. But what often isn’t discussed is the way that any type of childhood trauma can affect your finances, with its effects being especially felt at Christmas.

Different types of traumas

We often associate the term ‘trauma’ with catastrophic or violent events, also known as simple (one off event) and complex (multiple or ongoing events) trauma. These terms refer to events such as car accidents, house fires, war, bullying, domestic violence, rape or child abuse.

If you have not experienced such events you may be inclined to believe that you have not been affected by trauma. But what happens when we consider a broader definition of childhood trauma that includes the impact of abandonment, emotional neglect, parental divorce, death of a parent, or growing up with alcohol or drug addicted parent(s) or a parent affected by mental illness?

Factoring this broader definition of childhood trauma, a 2015 study conducted by the Blue Knot Foundation[1] found that, in Australia, one in four adults are estimated to have experienced significant childhood trauma. A similar study in America looking at Adverse Childhood Experiences (ACE)[2] found that two thirds of people surveyed experienced at least one ACE category.

How trauma and money interrelate

Whatever label we apply to childhood experiences and whether or not we view them as traumatic, it does not diminish the impact they have on us and our finances.

This is because money is not only closely linked to our survival needs and sense of self-worth, it is also the tool we use to manage negative emotions.

For example, traumatic events that violated our boundaries and sense of safety can lead to overspending as a coping mechanism.

Growing up with a parent who was highly critical or controlling can result in an adult who believes they can’t be trusted with money.

Divorce and adoption can trigger feelings of rejection or unworthiness (making it challenging to accumulate or hold on to money).

Children of alcoholic parents often become financial martyrs, learning to be the fixers and rescuers in the family.  

And while some who experienced poverty in childhood can grow up to become risk averse and hoard money as an adult, others might be prone to overspending and thereby unconsciously staying in familiar territory.

In short: how well your emotional and safety needs were met in childhood will significantly impact the way you manage your finances as an adult. The manner in which you respond (will you hoard money or overspend, for example) will be influenced by many factors, not least of which is the story that you hold to make sense of the events that occurred.

Signs childhood trauma is affecting your relationship with money

While not an exhaustive list, here are a few behaviour patterns that can occur in response to childhood trauma:

#1 (Over)spending when feeling unhappy

#2 Feeling overwhelmed and avoiding making financial decisions

#3 Regularly worrying about money, regardless of how much you save or earn

#4 Often lending money to others and struggling to say no

#5 Believing you are bad with money and difficulty letting go of past money mistakes

#6 Living paycheque to paycheque and often relying on friends and family for financial support

#7 Suffering from chronic ‘not-enoughness’

#8 Fearing investing or spending your savings

#9 Feeling unsupported and powerless to change your financial reality

#10 Using money to control people or situations

If any of the above sounds familiar, know what you are not alone and that it is possible for you to change this dynamic. Here are a few tips to help you get started:

Tune in to your emotions

The first step in transforming your relationship with money is to understand the emotions you experience day to day and how they impact your financial decisions. This exercise can be more challenging than it first appears because most of us were taught to ignore, avoid or suppress negative emotions. A simple way to get started can be to keep a daily journal and apply a zero to ten ranking to each of the following feelings: Happy, Sad, Angry, Fearful, Bored, Stressed, Jealous. Take a note of any patterns you observe, the events that triggered the emotions and how you responded.

Challenge your story

What we think about ourselves or an event (in other words the story we tell ourselves about it) affects how we feel and respond. Once you have identified any recurring negative emotions, try to identify the story that underpins them and see if you can challenge or reframe it. Consider, what’s another way to view the situation? What would you think about someone you admire who faced the same challenge or made the same mistake? The more practice you get at reframing the less power your negative self-talk will have over your financial decisions.

Seek support

Changing your relationship with money will take a conscious and consistent effort. The good news is that there are many resources available to help you break the cycle. These can be working with a therapist, financial counsellor, money coach or combination depending on your needs.


[1] Kezelman, C., Hossack, N., Stavropoulos, P., & Burley, P. (2015). The cost of unresolved childhood trauma and abuse in adults in Australia. Sydney: Adults Surviving Child Abuse and Pegasus Economics. https://www.pc.gov.au/__data/assets/pdf_file/0009/241749/sub047-mental-health-attachment1.pdf

[2] Felitti, V. J., Anda, R. F., Nordenberg, D., Williamson, D. F., Spitz, A. M., Edwards, V., Koss, M. P., & Marks, J. S. (1998). Relationship of childhood abuse and household dysfunction to many of the leading causes of death in adults: The Adverse Childhood Experiences (ACE) Study.


Natasha Janssens is a Certified Money Coach (CMC), author and founder of Women with Cents. For more of Natasha’s tips follow her on Instagram and take the Money Type Quiz.