What exactly is it that not only shapes our attitudes about money, but also influences our spending habits?
Why is it that some folks have no trouble sticking to budgets, while others fall victim to emotion?
Why do some people seemingly have no regard for the long-term financial impacts of too much debt?
A while back I wrote about the ten key characteristics of debt-free people.
In response, a reader named Kris had this to say:
For me, being debt-free has a lot to do with how I was raised. I saw what debt and spending could do, and I knew I never, ever wanted to live that way. Also, since I didn’t grow up with much, I didn’t have a habit of spending or being used to getting the latest things. I appreciated what I had, and I still don’t have the desire to spend on something unless it is something I really need.
I see how some people will conclude from my article that the way we handle our personal finances – and our attitudes about money, in general – is hard-wired in our brains from the moment we are born.
If true, it’s more than a little bit discouraging to know that our spending habits and aversion to bad debt are essentially preordained. But is it really?
Biology or Environment?
So what is it that ultimately influences our attitudes, not only about how we spend money, but how we manage our personal finances in general; biology or environment?
There are only three traits in my characteristic list of debt-free people that are biological characteristics:
- patience
- attentiveness to detail
- immunity from shopping addictions
All of the others seemed to be more susceptible to influence by one’s environment.
Making an interesting case for environment, a study conducted for Charles Schwab suggests that parents of kids who did household chores view their children as being more financially responsible than those who did fewer or no chores.
I know much of my personal finance philosophy and attitude about money came from my family. From an early age I remember my folks incessantly encouraging me to be self-reliant and financially independent. They often reminded me that it was important to work hard, save for the future, and eschew debt whenever possible.
As a teenager I also remember a cousin continually telling me that debt accrued in the present limits choices in the future.
Of course, family influence can also work in ways that encourage reckless spending and or a general neglect of one’s general personal finances too.
There are other factors that can have a big influence on our spending habits. For example, whether or not you grew up in good or bad economic times is a powerful motivator.
It is no big secret that economic health influences generational savings rates. Historical personal savings rate data verifies that each generation shows no proclivity to save money until it has undergone a significant economic downturn such as a severe recession or a depression.
Thankfully, most psychologists agree that we shape our attitudes about money over time. Obviously, when it comes to spending habit influences, both Kris’s comment and my life experience anecdotally bares that out.
Good News and Bad News
Okay, Len, I’ve got a dentist appointment. Where the heck are you going with this darn post?
If your past spending habits have now got you drowning in debt, I’ve got some good news and bad news for you.
The bad news is that you can’t blame your poor financial situation on your neuron biology.
The good news is there’s no need to despair because our behavior can be shaped and changed for the better.
You’ve just got to be willing to look inward and take that first step.
Photo Credit: stock photo
Environment played a big role regarding my money habits. When I was 14, my father ended up losing his job. We were pretty well off too at the time. I was amazed when we were never asked to cut back at all. We just kept on going like nothing ever happened. It took my father over a year to finally get a new job. Ironically, that’s when we were finally forced to cut back. My parents had never saved a dime in the good times and after my father lost his job they had run up so much credit card debt they were barely keeping their heads above water! Once dad got hired again they scrambled to pay back all the credit card debt they ran up. I vowed never to make the same mistake.
I’ve always been a saver, since the very start of my money earning capability (mowing lawns and paper route).
My dad was the same way. My mom was not, but she always ran a budget, and stuck to it.
We were always broke and living at or below the poverty level when I was a kid – perhaps that had something to do with my habits.
I keep a very close tab on my money and budget every penny and it is definitely due to how I grew up. My parents never seemed to have enough money. I remember them fighting a lot about where the money was going and how it was being spent and it really bothered me.
I raised my two kids the same exact way. They had the same allowance, curfew, chores, college funds, driving requirements, etc. But, they have very different attitudes towards money.
I think the reason for this is because my older son watched us struggle more when we were just starting out. My younger daughter never remembers living in the apartment, having one car or walking places. She only knows living in the house, going on more vacations and being chauferred around. So, she seems to act more entitled.
I have a great example of how environment played out with my spending/saving habits:
My parents divorced when I was 4. Back in the 70’s one parent had the right to move the child all the way across the US. And that’s just what my mother did. My mom remarried a very frugal man, my stepdad. He grew up during the depression and had a very stringent way of living. I learned to save my money and work hard from him.
However, when I would visit my dad once a year, it was a completely opposite lifestyle. Fly by the seat of your pants, wads of cash stuffed in his pockets, yet all too often his bank account was overdrawn. I loved visiting my dad because of the excitement (he also lived in NYC – which added to that excitement). BUT, I learned some of my behavior from him: last minute decisions without the worry of money = bad combination later in life!
So, environment definitely plays a part in how one views their own personal finances. BTW, my dad had a few lucky breaks and he’s looking okay for retirement. (But again, what does that teach me or his other kids!?.)
Definitely some food for thought. Seems like people can gain insight from their observations about money from growing up but might have some behavior issues that stem from that along with misinformation or beliefs. Tough balancing act.
I have three grown kids. Two have their act together but my oldest is constantly broke even though he has a good job. So it ain’t all about environment.
Very interesting article. I think that it is a combination of both with a heavier weight on the environment side.
I think it also may also depend on the TYPE of environment. For instance, we struggled when I was growing up. Fortunately, I took the path of ‘no way am I going to live like this when I grow up’ as opposed to others I know that just repeated the cycle. All 3 of us kids in our family are very financially responsible as adults.
Fast forward to my own family. I have 3 kids, all close in age. Child 1 does a decent job managing money, child 2 refuses to spend on anything, and child 3 will be bankrupt before he is 20 if he secretly gets his hands on any credit while he is in middle/high school. None of my kids really know struggle like I did. They have the clothes they need, all the food they could want, and can play travel sports. We do not buy them whatever they want by any means, but they have never seen us standing at the mailbox waiting for the next paycheck either. We all know how the Depression affected many people, and although I was not raised during the depression, I knew what poor felt like. Maybe if my kids felt that real struggle, it would have shaped their spending habits different. Instead, they are comfortable, so money doesn’t have the same meaning as it did to me at their age. Don’t get me wrong, my kids do chores, mow the lawn, shovel snow, pay for their own ‘entertaiment’ and such. However, if I had an extra 10 dollars when I was a kid, I bought a pair of pants, whereas my 16 year old may go to the movies instead.
Sorry for the long ramble, I just find it such an interesting topic. Also, thanks for basing this post on my comment. Have a great day!
@Len / The sibling question is an interesting one. My brother isn’t nearly as frugal with his money as I am and he doesn’t take good care of his stuff. But I equate that to the fact that he’s a male in college versus an out of school woman…
I agree with the consensus of others that environment plays a bigger role: more nurture than nature. But I think we learn more from observing than being lectured to. My mom raised three kids alone, walking a mile each way to work at a 5 and 10 store. I learned a work ethic by watching her life. She seldom talked the talk but she certainly walked the walk.
This being said, our kids are watching us. Hmmm.
As the wife, daughter, and in law of persons with Attention Deficit Disorder, I have to disagree with your conclusion. Executive function is the name for the functions of the brain that coordinate planning, scheduling, and allow you to foresee consequences. A number of brain injuries and disorders lead directly to an inability to control money, including ADHD, Traumatic Brain Injury, and mood disorders. While I like financial blogs (and as my Household CFO) I am often frustrated that if you “just” do x, things will straighten out. However, the current estimate for adults in the population with ADHD is 10%, which means that 10% of the adult population have difficulty with money management. (However, I also recognize that the likelihood of a ADD adult reading a blog like this is low, due to lack of focus). Thanks for you blog! I enjoy it!
Thank you for bringing this up. I am bipolar and have watched my similarly coded parents spend their way into the ground multiple times because they just can’t hack budgeting. As a result I am terrified to spend money – unless I’m manic! 🙂 It’s a tricky dance to manage.
Hi Megan, as a data point I have had ADD for years but I’m here and reading. 🙂 Budgeting has really been a life and money saver for me.
Very thought provoking. My savvy investing, saving, budgeting follow from my folks habits; Hubby, not so much. Maybe I’m his influence?
Environment is part of it. I am not sure the breakdown but part of it is situation (living at home and single allows you to have more disposable income).
I think that if most people are honest, they will admit that environment plays a larger part than biology! I know it’s true in my own life, and every client that I’ve met was the same way!
I think it’s mostly environment, but then I think about my dad and his brother whose only 1 year younger than him. My dad was Mister Career, spent his entire work life at one company. He never considered owning his own business.
My uncle started a restaurant in 1981 during a recession. I think the interest on his loan was 21%. It was great timing as the economy rebounded strongly soon after. My uncle was a successful entrepreneur for over 30 years.
I think the difference has to do with risk tolerance and ability to work for someone else – or not.
Do you think that maybe the biology is the foundation for our decisions, but that our environment governs the future direction?
It seems like many people who’ve had bad upbringings try to right themselves, but then end up failing/quitting/etc.
Bad times influencing one’s attitude about the use of money has been paramount in my life. I was born in 1931 and saw the nation’s hardship during the great depression of the 30s and early 40s. It caused me to be quite careful with money – it was hard to get it.
So, I used the instinct, so to speak, of recognizing sound opportunities to acquire it and use it to capitalize a lifestyle as independent as is reasonable, of the country’s macroeconomic condition.
I’m fascinated by these comments! So many different views, and like so many, my siblings and I grew up in the same home but ended up with very different money mgmt. skills. No idea how much is ‘nature’ or ‘nuture’, but I’m glad I got the “manage it down to the penny” gene because it helped us raise two kids on 1 salary so I could stay home and care for our disabled child. Our oldest learned from us, too; he bought his home at age 28, and at 34 now has all but the mortgage paid off! :o)