How to improve your money mindset and make better choices
Read, 4 minutes
Key takeaways
- Things we learn as children can lead to money habits that get in the way of our goals as adults.
- Specific actions can help us develop a healthier money mindset.
- Money and our mental health are closely linked. Struggles with one often lead to struggles with the other.
Our money decisions are objective, right? We crunch the numbers, consult the budget and make the call based on what’s most financially sound.
The reality is our behaviors, and bank accounts, often tell a different story. Research shows that money decisions are driven by emotions more than logic. They draw on attitudes formed in childhood and may lead to choices that actually work against our best interests. The way we come to perceive concepts like spending, saving, wealth and debt may even be holding us back from reaching money goals.
Breaking free of financial misconceptions is important to having a healthy money mindset and to ensuring that those ideas are not passed to future generations.
What we learn as children
Attitudes about money begin forming in children as young as 5 years old1, psychologists say. They are shaped by a family’s habits, actions, values and culture and become deeply ingrained.
For example:
A child who sees their family struggle to pay for necessities may always fear being poor, regardless of their income as an adult. They may have a hard time making a big purchase, such as a house or a car, even if they can afford it and it would improve their life.
A child whose family goes deeply into debt may view all debt as bad. They may struggle with accepting that credit is a neutral tool that is beneficial if used responsibly.
A child who grows up in a family that spends freely may believe they’ll always have money. They may end up spending more than they earn, taking on too much credit card debt or making impulse purchases.
Article continues below
Related content
How to change
The good news is that misconceptions, attitudes and behaviors that lead to financial stress can be changed. Psychologists and financial experts suggest these steps:
Write down your feelings when you get paid, go shopping, pay your credit card bills and plan a big purchase, such as a house or vacation. Be specific. What childhood experiences may be behind those feelings?
Reflection on your money can dredge up negative emotions about past missteps. Be kind to yourself. Try to acknowledge and accept the emotions without judgment or self-recrimination. This empowers you to objectively evaluate the action that caused the feelings and find ways to behave differently next time.
Many budgeting, banking and credit card apps will sort your spending by category. With that concrete information, you can analyze your needs and wants, set realistic goals and identify things you want to change.
One technique is to write a letter to congratulate your future self on achieving a goal. You describe specific actions, imagine how success feels and explore the consequences of not meeting the goal.
Lots of people struggle with money, and there’s lots of help available, including online tools, books, lectures, financial planners and psychologists who specialize in money issues. And don’t hesitate to reach out to trusted friends who handle their money well. They can be a great source of support and guidance.
Money and your mental health
Money plays a powerful role in mental health. More than 60% of employees are stressed about their financial situation, according to a recent study2. In some cases, financial strain can lead to mental health problems, psychologists say.
Unhealthy money behaviors may follow. For example, some people shop to deal with anxiety or depression. The act of buying releases dopamine, the “feel-good” hormone. They feel a temporary high, often followed by remorse. The body’s natural response is to seek more of the good feelings, which can set up a vicious cycle.
Realizing that money attitudes learned in childhood are not serving you well as an adult is a big step toward financial health. Your upbringing is not your destiny. You have the power to change your behaviors.
Mobile Banking requires that you download the Mobile Banking app and is only available for select mobile devices. Message and data rates may apply.
- https://michiganross.umich.edu/rtia-articles/new-research-shows-children-form-attitudes-about-money-young-age
- Employee Financial Wellness in America, Bank of America, 2023
