A child saves money in a glass jar at home
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Your relationship with money may seem random, but one expert says it offers clues about your childhood — and understanding it could help overcome toxic spending habits.
Vicky Reynal, financial psychotherapist and author of “Money on Your Mind,” told CNBC Make It that there are psychological reasons behind our spending habits, and many of these attitudes stem from childhood experiences.
“Our emotional experiences growing up will shape who we become,” she said.
For example, someone who felt secure during childhood might feel they deserved good things, and later in life be more likely to negotiate a higher salary or enjoy the money they have, Reynal said. Whereas someone who experienced neglect as a child may grow up with low self-esteem and this may play out through behavior related to money.
This can include feeling guilty when they spend money because they feel they don’t deserve nice things, or splashing the cash to impress because they feel unworthy of attention.
“A young child who comes up to his parents to show them his scribbles – how they react to them will give them a message about how the world will react to them,” Reynal added.
Scarcity or wealth
Reynal said the “money lessons we learn growing up” are largely shaped by whether we grew up in an environment of scarcity or wealth.
“To give you an example, growing up in poverty, people who manage to remove themselves from that economic reality, and maybe in their adult life manage to accumulate quite a bit of wealth, it’s quite common to struggle with what we call a scarcity mindset,” Reynal said. .
This is a thought pattern based on the idea that you don’t have enough of something, like money. A scarcity mindset means someone might have trouble enjoying the money they’ve earned and worry about spending it, Reynal added.
Alternatively, there are people who grew up with little but became rich and are now very careless with money.
They give themselves everything they longed for when they were little, so they could go to the other extreme and start spending rather carelessly, because now they want to give their children everything their parents couldn’t give them, Reynal added.
Stop self-sabotaging
The key to overcoming toxic spending habits is to stop self-sabotaging — a habitual behavior — according to Reynal.
“There are often deep-rooted emotional reasons behind a pattern of financial self-sabotage, and they can range from feelings of anger, feelings of undeservedness, to perhaps a fear of independence and autonomy,” she said.
To identify them, you first need to determine what your financial habits and inconsistencies are, Reynal said, giving the example of someone who might overspend in the evening.
“Is it boredom? Is it loneliness? What’s the feeling you might be trying to solve by overspending?” she said.
“It already gives you an idea of what you could do differently. So if it’s boredom, what can you replace this terrible financial habit with?”
Reynal said she had a young client who would always run out of money in the first two weeks of the month. She asked them, “What would happen if you were financially responsible?”
The client revealed that they were afraid to risk their relationship with their mother because every time they ran out of money, they called their mother and asked for more.
“Their parents divorced a long time ago, and the only time they spoke to their mother was to ask for money,” Reynal said. “They had an interest in being bad with money, because if they wanted to become good with money, then they had a problem: ‘Maybe I won’t have an excuse to call my mother anymore and I don’t know how to build that relationship again’.”
A financial psychotherapist recommended being “curious and non-judgmental” when considering the root of bad spending behavior.
“So we sometimes ask ourselves, ‘How would I feel if I hadn’t financially self-sabotaged or been so generous to my friends?’ It can start to reveal the reason why you might be doing it,” she added.
