learn about generational money trauma

Money Stress is a Mental Health Issue — And it Might Not Have Started With You

08.28.2023 — Megan McIntyre

While many of us struggle with our relationship to money, for some, that struggle runs a little deeper than your average stress around finances. Generational financial trauma is a very heavy term for what can be a wide range of complex familial issues that impact our behaviors and attitudes towards our finances. 

“Trauma can refer to a whole range of events or series of events that are distressing to a person,” explains Sonya Lutter, Ph.D., a certified financial planner, licensed marriage and family therapist, and the director of financial health and wellness at Texas Tech University. “When we put generational in front of it, we’re talking about looking back through our family history at events or series of events that were distressing to us.” 

Maybe you had a parent that didn’t know how to save and that led to some sort of housing instability in your childhood. Or perhaps you were in a well-off family that would use money to manipulate your behavior by rewarding you monetarily only if you got straight A’s or performed your chores in a certain way—and withhold affection or praise if you didn’t. According to Saundra Davis, MSFP, a financial coach, founder and executive director of Sage Financial Solutions, and founding member of the Financial Therapy Association, these actions can impact both your attitudes and behaviors toward money.

“There’s the behaviors, the attitudes, and the perceptions that we learned from the people who socialized us,” she says. “And there [can be] trauma from the lessons we learn and what we experience.” What you might not realize is that your past financial trauma could be causing you to have unhealthy attitudes or behaviors around your money. 

“Generational financial trauma can cause anxiety, depression, shame,” says Davis. “It can cause you to be an overachiever and a people pleaser. It can cause overspending, underspending, hoarding — I can’t tell you the number of people I hear from who are working with clients that are diligent savers that are now in retirement and refuse to spend the money to do the things that they saved up to do!”

As Davis notes, it’s important to recognize that generational financial trauma can impact people from all societal backgrounds. While BIPOC, LGBTQIA+, and women tend to be financially on the backfoot due to years of systemic oppression, Davis explains that generational financial trauma affects those from all walks of life and all socioeconomic backgrounds. “Oppression in any form can exacerbate and trigger those familial situations,” she says. “The fact that I have to work a year and nine months to make what a white man makes in one year is impactful. But that’s not to say that for white men it doesn’t work the other way. When you’ve been at the head of the line and suddenly people are saying ‘Now, wait a minute…’ that can be traumatizing for them. Am I glad they are having to deal with it? Sure, but I don’t negate the harm that it can do when someone has to live a life that is unfamiliar to them.”

“What a financial therapist can help you do is recognize when there is a gap between what you know and what you do.”

Sonya Lutter

Many people don’t realize that their financial behaviors are rooted in generational financial trauma. According to Dr. Lutter, the main way to distinguish whether you are dealing with your average financial stress and generational financial trauma is to take a look at how it is impacting your ability to regulate your emotions. “With financial stress, many of us are able to eventually look at that stress and problem solve and generally feel fine operating in our day to day,” she says. “With generational financial trauma, we have a difficult time regulating our emotions and we can’t logically problem solve or rationalize and it’s not like time will be able to fix that.”

Working with a financial therapist can help you sort through the complicated emotions you may have around your financial trauma to unravel what might be causing it and how it is affecting your behavior. “What a financial therapist can help you do is recognize when there is a gap between what you know and what you do,” explains Davis. “So you might know better but can’t do better.” 

A financial therapist is able to blend the money savvy of a financial advisor with the emotional intelligence of a therapist to help you work through your past generational trauma to build resiliency and confidence in your financial decisions and break the patterns that are holding you back, explains Dr. Lutter. “A financial therapist is there to teach you self-compassion and that you are not alone,” she says. “It’s about helping a person give themselves some grace and be comfortable moving forward. Their other key role is to help you build some of those personal finance skills and once you have that knowledge, to put that into practice to problem solve for yourself.”

Davis gives the example of what’s called the Internal Family Systems Model as a growing method being used by financial therapists for their clients dealing with generational financial trauma. Developed by Richard C. Schwartz in the ’80s, it recognizes that we all have parts to ourselves with different behaviors that may be at odds with each other, says Davis. “It’s an excellent approach to not shame, blame, or abuse yourself. One of the very first things that I do with my clients is we have the conversation of this is a no-shame zone. We’re not going to beat up ourselves for whatever we should have, would have, could have done.”

Talking about money and your past family trauma can be hard but with the help of a financial therapist, it doesn’t have to negatively impact how you deal with your finances today.

Megan McIntyre