Lifelong Money Habits Rooted in Our Youth

[rescueme]

We've discussed this subject in the past and as many have commented, their "relationship" with money is due to their own personal circumstances while growing up.

This article appeared on M* (Morningstar, for those that don't know the term), and I felt it was of value to pass on:

Lifelong Money Habits Rooted in Our Youth

Excerpt: "Money is one of the most powerful forces in society. Our survival and well-being depend on it. We need money for food, shelter, safety, security, and medical care, and also to fund our hopes and dreams. As a result, many of us have an emotionally charged relationship with money, which is shaped very early on in our lives."

I know that in my own life, my current views on the value/lifevalue of $$ were formed more than a half-century ago. I found the article quite interesting as related to my own upbringing, and how I view my (and DW's) financial situation in today's world.

I hope you find it of some value....

 

[Mulligan]

I wonder if it's rooted in lessons from youth, but also a life long habit, that cannot be unchanged due to repetition. Although my dad was poor in upbringing, he isn't so much the "Scrooge" reference towards others, but is so to himself. Now that he is at the point where he can enjoy his money, he can't/wont do it.
I can't convince him to make a few elderly adjustments to the house, specially the bathroom, that is an endangerment to himself. They stock up on food and I ask why, they say food prices are going up so they buy it now and on sale to save. I finally confront him on his "economy fear" and force him to tell me if he has ever had more money in his life than now, and of course he had to admit that he hasn't.
I told him everyone is just going to spend all his money after he is gone and he we will not have had a chance to enjoy the fruit of his labor. His response was "I hope they have as much fun spending it, as I have had saving it". That finally was his first true admission that being cheap wasn't about "the economy". I have come to the conclusion that it is useless to try to get him to spend anything on himself. So his behavior is definitely rooted.
I believe mine is also. I have always been a middle of the road person. Spend some now, while saving some. That is still occurring now in retirement, too. I have found very few of my friends behavior towards money has ever changed. Savers save, and the spenders spend, while a few are like me.

 

[Nords]

I hope you find it of some value....

Nice. I'm going to use it in Monday's blog post. Thanks!

 

[Bestwifeever]

Nice. I'm going to use it in Monday's blog post. Thanks!

Dealing with the money-emotion link is one of Suze Orman's core areas; I know you will want to cite her too .

 

[mickeyd]

Interesting article. Thanks so much for posting.

This would have been a perfect place for the author to bring up Bogleheads...

2. As investors, sometimes we are our own worst enemies, buying when the market is up and selling when it's down rather than the reverse. Does your research provide any insight as to why we fall into these bad habits?

...just sayin.

 

[Midpack]

Good article and it all makes sense to me, except IMO he missed the root of 'keeping up with the Joneses' in #4. If it was just an animal impulse, you'd think it would manifest the same across all cultures/countries, it does not...

 

[Nords]

Dealing with the money-emotion link is one of Suze Orman's core areas; I know you will want to cite her too .

Suze has to do something incredibly stupid to earn column space on my blog.

Luckily for her, it's not much of a challenge...

 

[Mulligan]

Suze has to do something incredibly stupid to earn column space on my blog.

Luckily for her, it's not much of a challenge...

Two years ago, I convinced my GF to buy a 10k I Bond with some leftover money she had from a good working year. She did it, but immediately started complaining at me for her doing it, because she could have "spent the money in a better way ". She didn't mean in investment terms, but in consumer non durable options. I couldn't get it through her head that the money wasn't "spent" ( I guess she thought of it that way because she couldn't get her fingers on the money for a year). A little over a year ago, I convinced her to read a Suze Orman book as that would be the only type she would consider reading. It must have helped a bit, as I haven't had to hear her blame me for "spending her money" anymore, and she still has the I Bond.

 

[easysurfer]

Two years ago, I convinced my GF to buy a 10k I Bond with some leftover money she had from a good working year. She did it, but immediately started complaining at me for her doing it, because she could have "spent the money in a better way ". She didn't mean in investment terms, but in consumer non durable options. I couldn't get it through her head that the money wasn't "spent" ( I guess she thought of it that way because she couldn't get her fingers on the money for a year). A little over a year ago, I convinced her to read a Suze Orman book as that would be the only type she would consider reading. It must have helped a bit, as I haven't had to hear her blame me for "spending her money" anymore, and she still has the I Bond.

Now your GF is probably sick of hearing Suze blaming her listeners and readers for not doing the right thing with their money

 

[azphx1972]

Nice article. Thanks for sharing!

 

[bondi688]

Manfred Kets de Vries, a distinguished Dutch business professor at INSEAD, who has MBA and DBA degrees from Harvard Business School as well as certificate as a psychoanalyst from McGill, had written a fair bit on that subject.

 

[Nords]

Nice. I'm going to use it in Monday's blog post. Thanks!

Here's the post:
Book review: “Pocket Your Dollars”

 

[obgyn65]

Yes, but I also believe the nature part is more significant than the nurture part, as discussed in another thread today. I believe being frugal is the way I am wired, or is part of my DNA if you will, and my education played no or little part in this.

Being a child I was never worried about food or money, I only grew up in a middle class environment. But as far as I can remember, I would delay gratification all the time, even saving my candy for later days. My brother, on the other hand, would eat all the available candy right away. Sort of the famous marshmallow test which has similar results over one's lifetime.

Excerpt: "Money is one of the most powerful forces in society. Our survival and well-being depend on it. We need money for food, shelter, safety, security, and medical care, and also to fund our hopes and dreams. As a result, many of us have an emotionally charged relationship with money, which is shaped very early on in our lives."

I know that in my own life, my current views on the value/lifevalue of $$ were formed more than a half-century ago. I found the article quite interesting as related to my own upbringing, and how I view my (and DW's) financial situation in today's world.

I hope you find it of some value....

 

[Gumby]

'The question is,' said Humpty Dumpty, 'which is to be master — that's all.'


Must we be perpetual servants to our childhood experiences or to our base emotions? I would say no. We can, if we so choose, be rational about earning, saving and spending money, regardless of our backgrounds. It requires mental discipline and is not easy, but it is possible.

I think most here would agree that early retirement requires the ability to say "I am master of life and my fate." It is crucial to note, however, that the concept of being master implies not only authority, but also responsibility. Yes, we need not be controlled, but we must accept personal responsibility for how our own lives play out.

 

[Lisa99]

I'm one who has been able to change early spending habits. Growing up I spent every penny of my allowance as soon as I got it. When I divorced at 25 I got a whopping $10,000 in settlement. I bought furniture for my apartment with it and put a small down payment down on a cool car I wanted.

Then I met my future husband. He spent money even faster than I did. Together we were more than $20k in credit card debt within our first couple of years marriage, we had two car payments and a mortgage.

Then the Internet bust happened and he lost his job three times in 18 months. Thankfully my salary was high enough that I was able to cover all of our monthly expenses including the mortgage.

When he finally got a consulting job that stuck, we continued to live on my income and put all of his in savings. That bad patch in the early 2000s is why we will be retiring in a couple of years...it taught us the value of money and that it could be taken away tomorrow.

 

[ERhoosier]

Interesting outlook on some important emotional aspects of money/finances. But not sure I agree with some of author's tenets. I had financially modest big city upbringing. Cannot think of a single childhood friend from blue collar family whose "self worth" was or became "synonymous with net worth". It was the 'poorer kids' who tended to focus more on family/friends for happiness. It was the "rich kids" at school who were money snobs (e.g. crying because they did not get a BMW (etc) as their new car for 16th birthday). And agree 100% with Midpack that 'Keeping Up With the Jonses' is not animal impulse. This financial mindset is not universal, and I've seen too many folks evolve beyond it to become more content human beings. Personal "Financial comfort zones" can and do change for lots of folks over their lifetimes. Not everyone is severely pained by a decline in their financial standard of living. Many willingly leave boring or stressful high paying jobs for positions of lower pay but more personal fulfillment.
I'll leave comments on Suzie Orman to others

 

[RobLJ]

Having gone to grade school in rural Missouri close to the Ozarks in what I thought at the time was a middle class home (not really once you left the Ozarks), my response is the bi-furcated recognition that I am living in the lap of luxury which I never considered possible, even though my wife and I by most standards of our income levels would probably be considered extremely frugal. This is exacerbated by technology--my stereo system would have been incalculably expensive back in the day, not to mention the high-def viewing experience.
Basically, my life has so exceeded expectations that my childhood money experiences seem completely disconnected--buying a baseball and bat was a big expenditure. I did blow money on books and records from junior high on and that behavior has remained consistent. Rather buy a book or record than a latte.

 

[BigMoneyJim]

As documented in the history of this forum, I changed my spending- and to some degree my saving habits around age 30. I seem to have the ability to step back, reassess myself and make changes if I think they are warranted (or simply wanted); this seems to be a rather rare trait from my observations of others.

On the other hand, I do remember noticing in my preteens/teens after my parents divorced that we didn't have as much stuff and didn't have as nice cars and housing. Oh, and we didn't have the Cessna 172 to fly around anymore. Otherwise I don't think I would have realized how good I had it as a younger kid. Perhaps that childhood perspective helped shape my self-assessment skills as an adult.