Parents pass on their financial attitudes and beliefs about debt to children


A growing body of research finds parents’ financial beliefs and behaviors often have a profound effect on children’s financial outcomes.

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If you’ve developed an unhealthy attitude toward money, or have racked up too much card debt, don’t lay all the blame on yourself. Your parents – and the financial attitudes and beliefs they passed down – could have more to do with your finances than you think.

A growing body of research has found parents’ financial beliefs and behaviors often have a profound effect on children’s financial outcomes – even if parents try to hide their problems from their kids or avoid talking about money altogether.

“Kids are pretty perceptive,” says Stuart Ritter, a senior financial planner at T. Rowe Price. “They know when things are going wrong.”

A recent study published by the National Bureau of Economic Research, for example, found parents’ attitude toward debt can significantly influence how children think about and approach borrowing money as adults. For example, parents who fret about debt or show discomfort about it tend to have children with similarly cautious views.

Children who grow up in homes that are more comfortable with debt, by contrast, may be more open to borrowing.

“If you ask kids about their attitudes toward debt, then you are asking about their parents’ attitudes,” says study co-author Roine Vestman, a professor of economics at Stockholm University. “You’ll find a very strong correlation.”

See related: Kids learn best by practicing their money skills, study shows

Habits form at early ages

Bad money habits may even start forming relatively early. Research by T. Rowe Price found that children whose parents declared bankruptcy or had significant credit card debt were more likely to blow through financial gifts rather than save them. Children whose parents modeled saving, by contrast, were more likely to set some money aside.

Parents don’t necessarily need to voice their feelings to pass them down. According to financial psychologist Bradley Klontz, kids pick up on cues and absorb messages about money by observing their parents’ financial patterns and behaviors. Klontz calls these subconscious views that children develop “money scripts.”

Passed down through the generations, money scripts are “beliefs about money that we inherit, quite often from our parents and our grandparents,” says Klontz.

“They typically are unconscious,” he said. “We’re not aware of them. We don’t talk about them.”

But they can strongly influence how you approach hot button issues, such as credit card spending or saving for retirement.

Klontz and his co-authors identified four financial patterns that research shows can powerfully influence people’s actions:

  • Money avoidance, which is associated with a fear of or discomfort with money;
  • Money worship, which often causes people to overvalue money;
  • Money status, which can lead people to measure their self worth with money and
  • Money vigilance, which is associated with saving money.

Parents’ influence can last for years

If children grow up in a household that values status or “keeping with the Joneses,” then they may grow up to overspend themselves, says Klontz.

“Those people are more likely to use credit because they want to show the world they are important and they have value.”

Similarly, people who grow up with parents who feel uncomfortable talking about or even thinking about money may also avoid dealing directly with their finances. That, in turn, can lead to denial and magical thinking.

Moriah John, a digital content producer at Moriah Digital in Florida, remembers her parents often tried to avoid thinking about their loans.

“My parents’ approach to debt was to ignore it,” she says. “I carried that over into my own life in catastrophic ways.”

When John received a bill for an emergency room visit, for example, she ignored it, damaging her credit. She later defaulted on her student loans and continued to rack up card debt, despite mounting financial problems. It wasn’t until she faced her troubles head on that she was able to dig her way out of debt and repair her finances.

Some families also give their children mixed messages about money and pass on bad financial habits by failing to show how purchases have consequences.

Quenton Rockwell, a real estate agent at CB&A Realtors in Houston, Texas, says his mom frequently spent money on her appearance in order to “look classy” or on comforting dinners out when she felt stressed. But when it came time to pay the bills, she’d fall short.

“We had money to go out, but did not have money to keep the electricity, water and heat on in the middle of winter,” he said.

Similarly, “credit and loans were no big deal” because his parents would insist they could afford the payments. “So when I went to college, my mentality was the same,” Rockwell said. “Rack up debt and don’t worry about it until later.”

Now a dad himself, Rockwell says he’s taken the opposite approach and is proactively teaching his children about earning, saving and giving away money to those in need.

See related: Kids with debt are in luck: 9 out of 10 parents would bail them out 

‘Savers’ can have unhealthy money habits, too

Parents who harbor an extra cautious or fearful approach toward money may also pass down unhealthy money habits, say experts.

“I’ve seen savers have just as unhealthy a relationship with money as spenders,” says Stephen Newland, a financial counselor in Atlanta. For example, Newland says his own dad was fearful of spending money and would feel guilty when he’d buy things.

After Newland reached adulthood, it dawned on him that he had unwittingly followed in his father’s footsteps.

“I realized, ‘Oh, I don’t like when I spend this money. It makes me feel scared,’” says Newland.

Once Newland realized he was making some of the same mistakes his dad made, he was able to snap out of it. “It helped me free up some of that guilt and go out and enjoy a nice dinner out or a nice vacation.”

Now, Newland helps clients break free from similar mindsets. “I always encourage people to take some sort of personality test,” says Newland. It helps people think through how they’re predisposed to handle money.

Overcome bad habits by looking inward

An inventory of your personal habits could also serve as a starting point for thinking about whether your preconceived ideas and beliefs stem from personal experience – or from your parents. For example, Newland recommends thinking back to how you handled money. Then ask yourself, “Do I see any of these habits in my own life today?”

Looking within and examining your actions and beliefs can also help you overcome some of the roadblocks that have prevented you from reaching your goals, says Klontz.

“I have yet to find someone who doesn’t know what they should do,” he says. “The basics are very simple: Save for the future and don’t spend more than you make.”

But too often, people are hampered by their subconscious habits and beliefs.

“Spending some time understanding your financial psychology can be incredibly valuable in helping improve your financial health,” says Klontz.

It can also help you be a better parent, says Ritter. “Taking a little time to think about the why of what you’re doing will help you think, maybe I should be doing something different with my kids,” he says.

Help your children avoid the same mistakes

Talking with your kids about money can also help shape their experiences and give them the opportunity to learn from your successes and mistakes.

“Kids are observing and they are drawing their own conclusions,” says Ritter. “You as a parent have the opportunity to provide them with more information and guidance to help them with those conclusions.”

Don’t be afraid to talk about your missteps either, even if you feel embarrassed by them. That, too, can be a learning opportunity, say experts.

“There’s a lot of shame around money. Shame we have too little, shame that we have too much, shame that we’ve mishandled it and that can cause us to not talk about it,” says Klontz. But “if you’re not talking about money, you’re giving your kids a message about your money.”

Even parents who handle money responsibly can inadvertently send their children the wrong message if they avoid talking about it.

Kristine Stevenson, a financial coach in Temple, Texas, says her parents were savers and successfully avoided debt, but they never talked about credit with their children.

“It just wasn’t part of their world,” she says. So when she went off to New York as a young adult, she opened her first credit card without any guidance on how to use it. “That was the beginning of a long slide down and getting caught in the trap. I wish they would have spoken about it more with me.”

See related: Young adults shouldn’t wait too long to get started with credit

Formal education can help kids become debt savvy

Schools also have a role to play in helping kids to overcome poor financial instincts, says Annamaria Lusardi, a professor of economics at George Washington and co-author of the 2018 NBER study.

“Not everything we learn at home is necessarily good,” says Lusardi.

Even well-intentioned parents may inadvertently pass on misconceptions – such as the belief that all credit is bad, no matter what – that can do more harm than good. Formal classes in financial literacy, by contrast, may help children take a more sophisticated approach that isn’t colored by emotions or by norms passed down through generations.

With better financial literacy, “people can make decisions about debt that are rational, that are informed,” Lusardi says.

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