How Your Childhood Affects Your Financial Life

Personal Finance
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By Holly Gillian Kindel

Learn more about Holly on NerdWallet’s Ask an Advisor

Much of your financial life is probably driven by beliefs that you aren’t even aware you have. These unexamined, ingrained ideas are known as “money scripts” and influence your financial behavior.

Drs. Brad and Ted Klontz, founders of the Financial Psychology Institute, coined the term money scripts to describe unconscious financial beliefs developed in childhood and often passed down by family members. These thoughts run through your mind like lines in a movie script when you think about money. They drive your decision-making about income, net worth, credit card debt, financial risk profiles and other aspects of your finances — often to your detriment.

When you were a child and overheard your parents talking about finances, were they anxious or in denial? Did money lead to arguments? These experiences probably formed your attitudes toward money. Identifying these beliefs and resulting behaviors is an important step in improving financial health and ultimately increasing income and net worth.

In their 2011 research paper called “Money Beliefs and Financial Behaviors: Development of the Klontz Money Script Inventory,” the Klontzes, along with Dr. Sonya Britt and Jennifer Mentzer, found that most people fall into one of four money belief patterns and are likely to agree with the associated money scripts:

Money avoidance. People with this belief pattern feel that money is bad. Associated money scripts include:

  • “I do not deserve a lot of money when others have less than me.”
  • “Rich people are greedy.”
  • “It is not OK to have more than you need.”

Money worship. People with this belief pattern are convinced that more money will solve all of their problems. Associated money scripts include:

  • “Things would get better if I had more money.”
  • “More money will make you happier.”
  • “There will never be enough money.”

Money status. People with this belief pattern think social status comes from owning the newest and best thing. Associated money scripts include:

  • “I will not buy something unless it is new.”
  • “You can have love or money, but not both.”
  • “Most poor people do not deserve to have money.”

Money vigilance. People with this belief pattern are frugal and don’t like to talk about money. Associated money scripts include:

  • “You should not tell others how much money you have or make.”
  • “It is wrong to ask others how much money they have or make.”
  • “Money should be saved, not spent.”

While some of these beliefs might seem reasonable or even laudable, in the extreme they can cause dissonance. For example, money worship can lead to compulsive buying, hoarding, workaholism, financial dependence and financial denial. And money status can lead to compulsive buying disorders, gambling and financial infidelity, where spouses and partners hide financial decisions from each other.

Money scripts can be especially dangerous when they no longer apply to your current situation. People who feel insecure about money might continue to work too hard and damage their health and personal relationships even when they have found a solid financial footing, for example. On the other hand, people who trust too much that things will always work out might find it hard to adapt when they face real financial hardships.

If you’re looking for ways to build better financial habits, it can be helpful to review the basics, such as how to manage your debt, maximize your savings and have healthy conversations with your partner about money. By educating yourself, you will have more options when you have to make important financial decisions.

Take a hard look at the scripts that might be driving your behavior so you can consciously write new, constructive scripts instead of blindly following ones that no longer serve your needs.


Image via iStock.