This is Your Brain on Money
Welcome to our new series about your brain on money. Many of us don’t think about how our relationship with money affects the way we think and behave. In our new series on this topic we are going to learn about why we handle money the way we do. Part three is 5 Ways to Break Free of Your Parents’ Bad Money Habits
Ways to Break Free of Your Parents’ Bad Money Habits
It’s one thing to inherit money from our parents; it’s quite another to inherit their bad money habits. Since we don't receive much financial education at school, what we learn about money tends to come from mom and dad. For example, if your parents never talked about money and racked up credit card debt, you might be doing the same thing. If your parents were frugal, you might burn through your paycheques, without realizing that you're making up for a childhood of doing without. The good news is, once you recognize how your parents influenced your money beliefs, there are ways to rewire your thinking to save money or get out of debt.
If Your Parents Were Silent About Money
If your parents never talked about money, religion or politics in front of others, you are not alone. Money needs to be spoken about and discussed for good habits to form.
What you can do: Make a date with your money at least every six months to scrutinize your spending and see how your savings are stacking up or debt reduction plans are working.
If Your Parents Lived on Credit
If your mom and dad kept a high running tab on credit cards, they likely overspent their salaries and relied on credit to get them through the month.
What you can do: Try a cash diet. Every week, withdraw just enough money to cover expenses, and limit your spending to that amount. Studies show people tend to spend less when they’re using cash, in part because parting with physical money makes more of a psychological impression than swiping a card.
If Your Parents Were Too Frugal
If your parents never enjoyed – or shared – their money, once you are earning your own, you might relish the thought of spending it a little too much.
What you can do: Set up an automated system that puts a percentage of your paycheque directly into savings. Spoil yourself once in a while, but also take joy in seeing your savings build up.
If Your Parents Spoiled You
When parents give their kids everything they ask for, they never fully grasp the cost of things and think they can get all they desire. That can lead to a cycle of borrowing that can lead to big debts.
What you can do: Give yourself a limit you can afford on spending for non-necessities and set up a fund for just that purpose. When there is something you want to buy, use that cash only instead of plastic.
What we think about money and how we behave can start quite early in childhood. Understanding what habits you learned from your parents can help you in learning how to break free of them and develop new habits that will save you money and help you get out of debt.
Sources: Psychology Today - https://www.psychologytoday.com/ca/blog/the-science-behind-behavior/201607/does-it-matter-whether-you-pay-cash-or-credit-card
Interview with Olivia Mellon