How to Break Bad Money Habits You Learned From Your Parents

Turns out our parents are a huge influence when it comes to how we manage money as adults—the good and the bad. Here are some ways to identify those bad habits and build better ones to pass down to your own kids.

Whether we like it or not, we learn a lot from our parents—including how we handle money. In fact, 30 percent of our financial behavior—good and bad—can be attributed to genetics, according to a 2015 study by the University of Washington that examined the financial decisions of identical twins.

Your parents' relationship with money might influence your own long after you leave the nest. For example, if you grew up in a household where money was scarce and constantly heard you couldn't afford something, it could lead to reckless spending as an adult or fear around spending money at all, financial coach Christine Sager tells Parents.

On the flip side, those who grew up with parents who had healthy conversations about money, who were taught it was ok to buy things within budget, and who learned how to save for big-ticket purchases—those are the kids who likely have a good relationship with their money as adults, too. Of course, there are systemic issues to consider: Lack of access to financial education, the racial wealth gap, and the wage gap for LGBTQ+ families don't allow much room for building healthy money habits or generational wealth.

An image of a group of 20 dollar bills.
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"We learn bad financial habits from our parents because they are normally our first teachers and examples of financial management, habits, and behaviors," Sharita Humphrey, certified financial education instructor, tells Parents. Humphrey says there were many things she made a conscious effort to unlearn—like building good credit and budgeting. But she doesn't blame her parents. "You can't teach what you were never taught, and I don't fault my parents for not teaching me these key financial lessons," says Humphrey.

We learn bad financial habits from our parents because they are normally our first teachers.

Now a parent herself, Humphrey is teaching her 5-year-old, Kyle, all about budgeting, saving for a rainy day, and investing—"I was determined to break the financial generational curse in my family," she says.

Here are some ways to break those bad money habits that have been passed down—so you can start a new legacy of financial education and wellness for your own kids.

Carefully examine your spending habits to see if they mirror your parents'.

Take some time to reflect on your spending habits to see if you can identify any patterns or behaviors that might be problematic. "Financial habits are one of the few habits that parents do not teach consciously most of the time," financial coach Alejandra Rojas tells Parents. We pick up our financial habits mainly based on the way our parents modeled behavior around money.

Look at your statements and see if the purchases align with your larger financial goals—if you find that you are regularly going over budget or in debt, reflect on the narrative you have built around money. "Explore the origins of why you manage money the way you do and why it may not match the values you have now as an adult," says Sara Rathner, travel and credit expert (and certified financial planner) at NerdWallet. Identifying the origins of your relationship with money will help you unlearn old habits that no longer serve you and build better ones.

Get comfortable talking about money.

Talking about money with family continues to be very difficult for a lot people—in fact, as of 2021, only 20 percent of couples participate equally in financial decisions. If your parents never openly talked about money (or if they argued about it all the time) it's likely that talking about money would make you anxious or uncomfortable.

"We didn't have money conversation in my family growing up, and I wish we had," says Humphrey. While talking about finances might be uncomfortable, normalizing conversations about money is the key to managing financial anxiety and cultivating financial wellness as a family.

Educate yourself on finances—chances are, you didn't learn it in school.

They say knowledge is wealth, and that's especially true when it comes to money. Since most of us aren't taught money management in school, we depend on the adults in our lives to teach us, and end up following the same path they did. "Kids observe and detect whether money or bills bring stress, anger, frustration," George Blount, a financial therapist, tells Parents. "Conversely, if financial matters result in positive behaviors, those are more likely to be imitated."

Today, we have access to financial education that our parents likely did not—whether that's the ability to do a simple Google search, follow money experts on social media, or take financial literacy workshops. "With so many financial experts on social media, it's easy to see or hear a good tip and recognize that it's not something that you're currently doing," Connor Brown, founder of financial literacy site After School Finance, tells Parents.

Taking advantage of free financial resources online (or even budgeting for a class) is a well worth your time and money, and can help you get more control over your personal finances. As you learn, you can teach your kids about money so they can start their financial education early on.

Consult a financial coach or therapist.

Examining the root cause of your financial habits can be complicated, and it might take a professional to help you sort things out. If you're feeling really stuck and unsure how to create new habits, a financial coach or financial therapist can help you.

"To fix bad money habits and build better ones, you need someone who understands money's emotional relationship," says Blount. "Individuals who are experts at financial products and services are likely to jump to a solution right away. Instead, you need someone to invest the time in understanding the origin."

A financial therapist can help you examine the limiting beliefs and narratives you have around money, and guide you to make changes that will help you overcome them. You can find certified financial counselors and therapists at the Financial Therapy Association or Association for Financial Counseling & Planning Education (AFCPE) websites.

It's ok to take risks and have a mix of stocks and bonds in your investment portfolio.

One of the bad money habits your parents might have passed down is by either playing it too safe with investments, or making risky ones. To avoid this, make sure you have a well-diversified investment portfolio, says certified personal finance counselor Andrew Latham. He adds that while your parents may have invested in certificates of deposit (CDs), they are no longer a sound investment because you are guaranteed to make less than the rate of inflation, which is 2 percent.

"Certificates of deposit is guaranteed to make you lose purchasing power (i.e. money)," Latham points out. Instead, build a portfolio that includes a mix of stocks and bonds, so you can capitalize on the growth of stocks, and have bonds as a cushion. "Bonds and stock prices usually move in opposite directions," Latham explains.

Bottom line: Breaking generational money habits and creating a more positive relationship with money is definitely possible with education and the right resources. Cultivating these habits for ourselves and our families—no matter how difficult—means greater financial literacy and wealth for future generations.

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