How Generational Trauma Affects Your Finances and How to Heal

Generational trauma can affect your financial behaviors and how you feel about money. Here's how to heal.
Tiffany Curtis
By Tiffany Curtis 
Edited by Kathy Hinson

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There are a lot of conversations on and off of social media about breaking “generational curses,” which essentially means healing from generational trauma.

And part of healing from generational trauma involves changing our relationship with money.

What is generational trauma?

With generational trauma (also called intergenerational trauma), emotions and behaviors linked to adverse — even terrifying — events are passed down through generations within a family, according to the American Psychological Association, or APA.

The effects of generational trauma can be seen in individuals, families and communities — and these effects can touch every area of our lives, including finances.

What is generational financial trauma?

If you experience money shame or feel like you’re bad with money, that can indicate you’re carrying some generational financial trauma. In research done by Chloe B. McKenzie, founder of the Center for Financial Trauma & Wealth Justice, McKenzie explains financial trauma as “the response to the cumulative harming of a person’s wealth-building capability and relationship with money.”

“Generational trauma is arguably the biggest impact to our relationship with our finances,” Rahkim Sabree said in an email. Sabree is a certified financial education instructor and author of the book “Financially Irresponsible.” “Often we learn by observation and reenact the things we saw our parents and grandparents do when it comes to the ways we think about, or even what we believe is attainable, with our finances.”

Generational trauma around money can also stem from societal or systemic causes. For example, racial discrimination and poverty are experiences that can lead to trauma being passed on, according to the APA.

“Some examples of financial trauma could include the financial overlap from divorce or child support orders, the inability to participate in scholastic or athletic programs due to a lack of money, or any experience that comes out of navigating poverty,” Sabree said. “I often make reference to boiling pots of water to bathe, or the embarrassment of having the food stamps card (SNAP) decline after emptying a cart of groceries onto the supermarket conveyor belt.”

Who is affected by generational financial trauma?

Anyone can experience generational financial trauma, but some groups are disproportionately affected. LGBTQ+ people, Black people, Indigenous people and other people of color have experienced historical trauma, according to the U.S. Administration for Children & Families.

And the legacy can still be felt today when it comes to wealth inequality:

  • The average Black and Hispanic or Latino households earn about 50% less than the average white household, according to 2021 data from the Board of Governors of the Federal Reserve System.

  • Members of the LGBTQ+ community face higher rates of workplace discrimination than their cisgender/heterosexual peers, which leaves them earning less and impacting their ability to manage expenses, build savings and buy homes, according to the Center for LGBTQ Economic Advancement & Research.

  • Black women are paid, on average, 64 cents to every dollar that white, non-Hispanic men earn, according to 2021 data from the U.S. Bureau of Labor Statistics and the U.S. Census Bureau.

Financial trauma can also affect people with wealth or disposable income.

“Money trauma impacts everyone, including those with perceived wealth, especially in instances where the subject has never had to learn about managing finances,” Sabree said.

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How generational financial trauma affects you and your finances

Financial trauma affects how we feel and talk about money, according to Aja Evans, a licensed mental health counselor and financial therapist.

“The way we speak about wealth impacts how kids around you learn and understand finances — you then see it pop up in how that child relates to money and deals with it in their adulthood,” Evans says.

Things you may experience as a result of generational financial trauma include:

  • Overworking, in an attempt to change your financial circumstances.

  • Overspending and avoiding taking stock of your finances because money brings up painful emotions.

  • Being overly frugal.

  • Feeling ashamed of needing financial help.

Financial trauma can leave a mark on your overall well-being, too. Evans has seen this in her work: Helping clients work through eating habits that have been shaped by being food insecure is just one example.

How can you start to heal?

In an ideal world, those who have survived historical trauma would be better supported on their financial wellness journeys. Stronger diversity, equity and inclusion efforts from corporations and real moves to make reparations for Black Americans are some of the systemic changes Sabree would like to see happen.

Working through financial trauma isn’t easy and there are no quick fixes. Practice self-compassion throughout your healing process.

Here are some strategies to help you begin.

Acknowledge how you feel about money

Avoidance is one of the signs of financial trauma, so there’s power in facing how you feel about money head-on. Start by acknowledging the painful emotions or experiences that you have in connection to money.

“Allow yourself to feel those feelings. If you find yourself getting overwhelmed, this would be the time to seek support and guidance about beginning to navigate the process,” Evans says.

There are financial therapists who use behavioral therapy and financial coaching to help shift your mindset about money.

Set boundaries

Learning how to set financial boundaries could help you to have a better relationship with money.

“Remind yourself of how you feel when you stretch your boundaries — that is why you are making it, to ensure that you feel good about your financial decisions and prevent feeling bad,” Evans says.

Money boundaries might look like:

  • Creating and sticking to a budget.

  • Saying no to someone who often asks to borrow money.

  • Offering to cover an expense for a loved one directly, instead of giving them cash.

Seek support

You don’t have to navigate generational financial trauma alone. Support can come from a mental health professional, a financial coach or even people you trust within your circle of friends or community.

Support can help you process difficult emotions, help you better understand your relationship with money and keep you accountable. Seek out support from professionals and people who understand how your lived experience has shaped how you relate to money.

That could mean:

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