Thanks, Granny: Money Quirks (Good or Bad) Can Be Inherited

To learn about your own financial strengths and help eliminate your weaknesses, trace your family tree.

A pile of family photos
(Image credit: Getty Images)

Dad was a spender, and Mom was a saver. My parents, Depression-era babies, kept a jar of dollar bills behind the fridge for when the banks crashed. My grandparents were immigrants, and in our family homeownership is priority No. 1, no matter what the interest rates or other debt you have.

We all have these stories — the epic narrative of our family’s financial background.

Like short tempers and a sweet tooth, money habits are at least in some part inherited and influence our behavior, whether we like it or not. Do you find yourself unable to sleep at night with even the smallest debt on the books? Do you overspend on status items (new cars, fresh clothes) while your credit card bill gathers interest?

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These behaviors are part of a story — a narrative that’s been going on since before you were born.

How My Family’s Financial History Influenced My Own Money Habits

To this day I can still picture every detail of my Smurf bedroom. I loved that bedroom. It also happened to be in a trailer park. It's the first home I clearly remember. When I was born, my parents were practically teenagers, without anything resembling a financial strategy.

I grew up with the reality that hard work and education were our only defenses against poverty. Even though my parents didn’t know the finer points of financial aid and college prep, they pushed me toward this goal with both hands.

Now I find myself comfortable financially, but living well below my means, afraid to part with money. I have a decent four-bedroom house and a car I plan to drive until the wheels fall off. I rarely eat fast food and would rather take a few small vacations a year than a single audacious one. My financial life could be different, but the invisible script I absorbed growing up tells me to keep it simple, because “you never know.”

What Does Your Family’s Financial History Mean for You?

We can look back on our family story to know ourselves and our families better. The most unreflective impulse we have when we think of money is simply to have more of it. To stop the discussion there is to misunderstand ourselves.

You will have a relationship with money your whole life, and the many sides of this connection — from BFF to “frenemy” — are much more complex than simply wanting more. Looking at how you react to cash can give you insight into yourself and into improving this relationship in the years to come.

How to Map Your Own Family’s Financial History

One helpful model for tracing back your personal history is the family financial genogram — it’s like a family tree diagram, but with finances in mind. To explore your own family’s financial history, three questions guide the process:

  • Family patterns: How did your parents handle money? Your grandparents? Did any historical events (Great Depression, war, etc.) affect the way they behaved financially?
  • Financial obstacles: What kind of financial difficulties has your family faced?
  • Family rules: What were your family’s “messages” and “rules” about money?

Answering these questions can help you diagnose your financial behavior, which is the first step toward changing negative behaviors and reinforcing positive ones.

An Example: Jane SpendThrift

Jane SpendThrift’s paternal grandparents were immigrants from a politically troubled, impoverished country in Europe. They worked seven days a week and counted out their paychecks to the nickel, continuing that behavior even when they did well financially.

Jane’s father went in the opposite financial direction, spending much more freely. He married a woman whose Depression-era parents also pinched every penny, and she ended up with a similar reaction to her upbringing. Jane’s parents embraced their baby boomer identity with new motorcycles and trips to Vegas and Disney, tossing a token amount in savings with no plan.

From her grandparents, Jane learned that a “penny saved is a penny earned.” From her parents, Jane learned life is short, and he who dies with the most toys wins.

So where does Jane end up? She finds herself working extremely hard, so she never has to wonder how to pay rent or utilities, like her family did for a few months in 2008. She stresses about finances constantly, even when she’s doing fine, and leads an imbalanced life to keep her books balanced.

She pays her bills, keeps a zero rollover on her credit cards, yet never finds herself able to build lasting wealth.

Thinking through her family history, she sees how her grandparents’ and parents’ stories have woven into her own. She talks it over with her adviser and some close friends and realizes that her long-term financial dream is stability, but her short-term stress relief valve is spending.

She goes home to a closet full of new dresses purchased after a breakup and drives a new car she bought shortly after she was laid off, an impulse purchase with a high-interest loan.

Break it down like this:

  • Family patterns: Immigrant grandparents taught her the value of hard work. Parents taught her that relaxing means spending.
  • Financial obstacles: Her grandparents changed cultures, faced a language barrier and started over. The 2008 financial crash she witnessed as a teen affected her psychology with the scary reality of financial hardship.
  • Family rules: Jane is sandwiched between her grandparents, who treated money with a nervous solemnity, and her parents, who flaunted it with little thought. Her relationship with money is complex and evasive.

Jane SpendThrift is young, but her issues could multiply over the next 20 years if she doesn’t develop better habits. In middle age, Jane could have minimal savings, having hardly started on her 401(k) strategy. She might find herself unable to help her kids with the cost of college, sending them into adulthood on the wrong foot.

Instead, Jane Spendthrift takes action. She calls her adviser and sets up a plan to create an emergency fund while strategically paying off high-interest versus low-interest debt. She also gets a gym membership and sees a life coach to develop better coping strategies to manage stress.

Armed with this awareness, she recovers from stressful events surrounded by friends, enjoying a simple evening at a favorite restaurant, instead of binge spending.

Learning from the COVID-19 Financial Crisis

What will show up on the financial genograms in 2040? Will our kids and grandkids have a compulsive need to double their emergency funding, because they remember a parent suddenly laid off during quarantine? Will they be acutely sensitive to volatility, because of the ups and downs we’ve weathered this year? There’s no telling for sure, but “knowing is half the battle,” as GI Joe used to say.

Now, when we are in the middle of a life-transforming event, is the time to become aware of how personal and global events shaped our story and the grand narrative of our family. To know this is to know ourselves, and to know ourselves is to build a better future for the next generation.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Erin Wood, CFP®, CRPC®, FBSⓇ
Senior Vice President, Financial Planning, Carson Group

Erin Wood is the Senior Vice President of Financial Planning at Carson Group, where she develops strategies to help families achieve their financial goals. She holds Certified Financial Planner, Chartered Retirement Planning Counselor and Certified Financial Behavior Specialist designations.