Financial trauma as a child affects how you deal with money


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When I was a teenager, a relative owned a very successful retail franchise in Sydney. My parents decided to partner with him and started other franchises along the east coast. Together, they became so successful that, at some point, it appears they became viewed as a threat by the parent franchisor.

Due to an unusual contractual loophole, and some major suppliers who were encouraged to delay stock delivery, the parent company was legally allowed to take control of all the successful franchises, cutting out my relative and parents and holding them responsible for all current liabilities.

My parents went broke overnight, losing all their investment properties, our family home, shares and all accumulated wealth that had been built up over years of hard work and sacrifice.

money trauma in childhood

Everything was gone.

The injustice and dramatic sudden loss were deeply traumatic. My brain marked this trauma as something I never want my own family to experience. While some good lessons were learnt (such as never sign anything I don't fully comprehend and never take my eye off the business essentials), the trauma created strong fears that haven't served me well.

I'm terrified of franchising-like arrangements. I have struggled to trust others in business, constantly imagining ways that they could take advantage of me. I have tended to micro-manage many parts of my business, questioning and hovering over experts who are far more competent than me in their field.

My trauma triggered fears and beliefs that were causing me to behave in ways that were significantly interrupting my chance at success. I needed to heal.

A trauma is any life experience that teaches you that the world is not a safe place. It can be as small as your parents raiding your childhood piggy bank to do something for themselves, losing money on an investment that a friend encouraged you to buy into, or even using hard-earned savings to buy something others considered foolish.

Traumatic memories trigger emotions that tell our instinct to be cautious, not to trust, that there is something ahead that will cause us pain. The avoidance of an imaginary negative outcome can feel as good as avoiding an actual negative outcome, derailing all manner of opportunities. We need to learn from failure, but also heal the psychological wounds and broken trust-lines that trauma creates, in order to take hold of opportunities.

American psychologist Vienna Pharaon says that "avoiding your triggers isn't healing. Healing happens when you are triggered and you're able to move through the pain, the pattern and the story - and walk your way to a different ending." I think there is great truth in this, particularly in relation to financial trauma.

The first steps to recovering from financial trauma are to recognise what experiences your brain has registered as traumatic and break the cause-and-effect connections inferred from those experiences.

I needed to believe that a parent company is unlikely to try to hurt those who are building it up, that trusting other experts to do their job isn't being lazy or exposing myself to risk, and it's okay to own assets that might be at risk if a business goes bad. Lessons from trauma can be hard to unlearn.

However, once you realise that these beliefs are undermining your potential, you can start the journey to a more successful future.

Things to do to help heal the trauma

  • Journal

Keep a daily diary where you reflect on big decisions and things that are troubling you. Ask why they are troubling and if beliefs are based on data or just triggered reactions to past trauma. • Exercise and sleep. Our physiology and psychology are more linked than we realise.

A healthy routine keeps the human body's chemical mix in balance, better regulating our amygdala (the part of the brain that primarily processes emotional responses) and lessening fear reactions to insignificant triggers.

  • Be mindful

Practise staying completely in the present moment through meditation and mindfulness.

What is happening now is all that matters.

  • Stay positive

Negativity is a psychological poison that kills opportunity.

Practise recognising the good in others and in situations, while also remaining vigilant to risk. Positivity isn't gullibility.

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Phil Slade is a behavioural economist and psychologist and the author of Going Ape S#!t! and founder of Decida. He works across digital innovation, strategy and cognitive bias. Phil holds a Bachelor of Psychology from The University of Queensland and a Master of Organisational Psychology from Griffith University.
Karen Eley
November 20, 2022 11.04am

Childhood trauma around money deeply impacts the way we behave today with respect to our finances. As a Money Coach, I work in this space on a daily basis, helping people examine and unpack those childhood experiences (big and small) that inform their current behaviours with money. Thank you for sharing your story Phil. Some great tips here.