Struggling With Money Stress? How Healing Financial Trauma Helps Your Family

Fact checked by Sarah Scott

Key Takeaways

• Financial trauma can affect your mental health and be detrimental to your current relationship with money, but healing is possible with the right support.
• Being open about money with your kids and teaching them how to budget their own money, helps them build confidence and healthy financial habits for the future.
• Involving kids in age-appropriate budgeting decisions teaches them not only to appreciate what they have, but to make sound financial decisions in adulthood.

Between the ever-increasing price of groceries , the high cost of extracurricular activities and sports teams, rent hikes, and all of the other little emergency expenses that come up when you’re raising kids, it’s no wonder that most parents occasionally worry that their paycheck won’t support their lifestyle. Often, a bit of adjusting keeps the family budget balanced but sometimes those worries can spiral out of control, resulting in lifelong emotional and material consequences, from guilt and shame to insurmountable debt.

Stress about money that is disrupting your life is known as financial trauma, and it’s become a mental health crisis among adults: A 2016 survey found that 1 in 4 Americans “experience a debilitating degree of stress surrounding their finances,” including “feelings and behaviors that are most commonly associated with post-traumatic stress disorder [PTSD].” Here are the signs you might be suffering from financial trauma, plus how to heal and pass healthy money habits down to your kids.

What Experiences Cause Financial Trauma?

Travel blogger Brian Murphy recalls being hit hard by the 2008 recession. “It was brutal. We had to sell our townhouse, pack up everything, and move in with family,” he told Parents .

At the time, his kids were old enough to question why they weren’t living in their own home, and Murphy found it difficult to give them a coherent answer as he struggled to process his own feelings about this traumatic life change.

“There was a lot of shame mixed with guilt but we took it day by day. It’s funny how life forces you to get humble in a hurry.”

Almost every family has experienced money-related stress—which might look like worries over grocery prices or budgeting for new school clothes. But what Murphy and his family experienced was an extreme incident that became a catalyst for financial trauma. And there are many other ways that financial trauma can manifest in a person’s life.

For instance, people who experienced chronic poverty while growing up or who are struggling under crushing medical or student loan debt might be particularly fearful of financial insecurity. Sometimes a stand-out life event might also be the catalyst for financial trauma later in life—for instance, a move to a new home, a medical procedure that insurance didn’t cover, a natural disaster, or a difficult divorce that drains your life savings.

“Financial trauma can also occur if you or your partner is suffering from a gambling addiction, you are a victim of financial infidelity in your close relationships, or if you have fallen victim to an investment or romance scam,” adds Erika Rasure , a financial expert and wellness coach.

Racism and discrimination can also be at the root of financial trauma —for instance, a family of color might be denied a loan to buy a home which might cause a mistrust of financial institutions or a tendency to obsessively save money —a habit that can take on even more importance when you have a baby.

Families can pass that trauma down through the generations, leading to “tremendous amounts of shame and confusion as you try to unpack which money beliefs belong to you and which ones you were either given or inherited,” says Rasure. Even if you did not experience the inciting incident in question, you may still feel the repercussions of financial trauma, or inadvertently pass them down to your children.

What Form Does Financial Trauma Take?

When stress about money gets out of control, it often manifests as two polar opposite extremes. Sometimes those experiencing financial trauma save money to the point of hoarding, even when they might urgently need to purchase necessities like a warm winter coat or medical care. Other times, as Rasure explains, it can look like dramatic spending outside of your budget, as a means of comfort or to feel more in control.

In her time working with people who have experienced financial trauma, Rasure has noticed that they often “question their self-worth, their value, their intelligence, and their ability to trust themselves or others.”

“[They] are less likely to reach out for support or help out of fear they will be questioned or mocked by those around them,” she adds, “so they suffer in a silence where the effects of financial trauma are only amplified in isolation.”

That being said, financial trauma can look like any of the following behaviors:

• Feeling guilt or shame about a high-paying job

• Fear of financial insecurity

• Extreme money-saving habits that prevent you from paying for necessities

• Avoiding potentially uncomfortable conversations about money with your kids, loved ones, or friends

• Anxiety about money that causes an inability to make a budget or ask for a raise

• Money-avoidant behaviors, like ignoring bills or procrastinating payment until services are shut off or bills are sent to collections

• Overindulging in non-essentials that are above your means, to the point that you end up in debt

• Working to the point of burnout in order to earn as much money as possible

• Controlling or dictating how other family members spend their money

How to Heal from Financial Trauma

The first and most important step that parents can take when it comes to healing from financial trauma is to get introspective about their own relationship with money.

“Money is practical, but there are also so many feelings attached to it,” says Gary Small MD , the chair of psychiatry at Hackensack University Medical Center. “We have to look at our own relationship with money and what it means to us. Once we straighten it out for ourselves, that'll make it easier to deal with it [in our families].”

Next, they should immediately adopt a policy of openness about their financial situation, even if that means sharing when they’ve made money-related blunders.

“Families should teach and support positive financial behavior, and course correct without criticism. By allowing room for mistakes to be both normalized and become catalysts for growth and learning, they help reduce shame, improve financial literacy, and create an environment where support can be found,” explains Rasure.

Parents also need to build back their confidence in their ability to manage money. According to Rasure, strategies might include “seeking the help of a therapist to work through their financial triggers,” or “finding a way to learn more about money by taking a class, reading books, or [consulting with] a financial professional.”

Crucially, surround yourself with a trusting support system—even if it's just one person who can be a source of non-judgemental, sympathetic guidance—so that you don’t feel as though you have to struggle or find solutions alone.

Passing on Healthy Financial Habits to Your Kids

Parents should work on themselves before implementing strategies for imparting a long-lasting positive mindset about money to their children. Once you’re ready, here are some ways to help teach your kids healthy money habits , right from the start.

Practice transparency

Murphy and his family got through that rocky financial period and decided to take a new approach to handling finances at home—in particular, by being honest and transparent with his kids.

“Over time, we started talking about the mistakes we’d made, the choices that led us there, and what it takes to rebuild. We didn’t want them growing up afraid of money or weighed down by shame of situations out of their control,” he says.

Today, he says his kids “understand the value of budgeting, saving, and adjusting when life throws a curveball.”

Being honest with your kids about money might feel awkward or uncomfortable at first—especially if money was never discussed in your household during your childhood—but it's a crucial first step in breaking the cycle of financial trauma.

Honesty “reduces the pressure on both you and your kids to be perfect,” says Rasure. “Remember that you are the center of your child’s world, and they look up to you–modeling imperfection and humanity with money is just as important as modeling positive financial behaviors.”

The end result is hopefully that when your kids are grown up, and inevitably make a money-related mistake—as everyone does—they’ll be able to ask for guidance without feeling shame or fear of criticism.

Make budgeting a collaborative effort

One way to start talking to your kids about money early on is to involve them in budgeting for your household. Rasure recommends steering clear of phrases like “We can’t afford that.” Instead try a framing like, “We are saving for our summer swimming pass right now.  Once that financial goal is met, we can come back to this.”

Kari LeMay , a former marketing consultant, describes the many strategies she used to raise her four kids while struggling financially, and that included a lot of collaborative budgeting.

For instance, when the family went to the grocery store together, she’d tell the kids that their budget for the week was $100. “We’d look at the options for the food we want to buy and together, we’d figure out which one was the best option for a family of our size. And when we got to the checkout, sometimes we had to put some items back because we had exceeded our budget. They helped decide which items were not coming home with us,” she says.

One weekend a month the family came together to make freezer meals for the next four weeks, and she even gave them a dollar amount for gifts around holidays and birthdays so they didn’t ask for something the family couldn’t afford.

Instead of leaving her kids isolated or confused, these strategies helped them feel involved and gave them some level of control over the family’s finances, while also teaching them to be appreciative of what they did have. Rasure says approaching family finances in this way can “validate [kids’] financial smarts and help them think critically about financial decisions age-appropriately along the way, to help build their confidence and trust in themselves.”

Healing Financial Trauma Is Possible

Financial trauma causes psychological and emotional distress that can disrupt your relationship with money. But with the right guidance and support in place, it’s possible to repair that relationship and break the cycle by imparting healthy financial habits to your kids.

“Everyone has money issues, but not everyone talks about them because it still remains taboo,” says Rasure. “But talking about it is the first step in shining a light on what is in the dark–and once it’s out of the dark it’s like finding that the monster in the closet wasn’t as big and scary as you thought.”

Read the original article on Parents