Breaking the Cycle: Overcoming Intergenerational Financial Stress

There are some things in your life that you don’t have control over, like the family you were born into or how you were raised. The financial stress you’ve inherited is real and not a personal failure. Research from Nature Human Behavior found that intergenerational poverty in the U.S. is three times that of Denmark, with poor children more likely to become poor adults.

While you can’t change the past, you can fix your future. You have the power to break intergenerational financial stress. WorkMoney has your roadmap for getting away from feeling trapped by your financial trauma and creating long-lasting money habits for the better.

Your Financial Stress Is All Over Your Body

It’s not all in your head. Survival mode takes over your entire body, putting you in fight-or-flight mode. Chronic stress puts your health at risk. A Mayo Clinic study found that adrenaline makes the heart beat faster, giving you more energy, and triggering cortisol — the main stress hormone. 

Once the threats have passed, hormones usually return to their normal levels. Adrenaline and cortisol fall, your heart rate returns to normal, and your blood pressure returns to pre-threat levels. But if you’re only feeling stress, your body stays in fight-or-flight mode, keeping hormone levels high.

Ongoing cortisol spikes lead to long-term health issues, like heart disease, high blood pressure, and strokes. You might also see other problems, like anxiety, depression, memory issues, sleep problems, and weight gain, among others. 

What you’ve been carrying with you is real. A different study found that children born to mothers experiencing chronic financial stress show different cognitive development outcomes compared to siblings born during times of financial stability. 

If you’re feeling exhausted from constantly being stressed about money, it’s because there’s been a biological shift in your body. Recognizing it is the first step towards changing it.

Protect What You Have With Defensive Wealth-Building

One tragedy shouldn’t erase years of progress. If you’ve gotten out of poverty and escaped financial hardship, that’s an amazing step towards stability. But a major crisis can wipe out all those gains. A death in your family, a major illness, or a life-changing event can wipe out those gains that got you out of poverty in the first place. All of your hard work gets erased.

Whether you’re expected to take care of aging parents, caring for children of your own, or want to make sure your partner is financially stable, set up a simple will and term life insurance. Trust & Will gives you the tools to protect the progress you’ve already made, helps you ensure your assets, and gives you security without paying for a high-cost lawyer.

Regardless of where you are in life, creating an estate plan prevents major life changes from causing catastrophic financial damage.

Setting Financial Boundaries

Family members asking for money or covering loved ones' costs might make you feel good about being able to help those in need. But these incidents can cause you to lose out on financial security — the one you’ve been seeking all your life, or what you’ve recently attained and want to keep.

It’s nice to help, but it’s vital for you to keep your financial and emotional peace by setting boundaries. Create a script so you know exactly what to say when you’re approached for money. 

• When asked for a loan you can’t afford: “I want to help, but I can’t afford to lend money right now without putting my own family at risk. But I can help you look for other resources and programs that do help.”

• When repeatedly asked for help: “I’ve had to set a firm limit on financial gifts. I’m not able to help right now, and I hope you understand.”

• When someone makes you feel guilty for earning more: “My financial stability has allowed me to be able to support my family, and I’m grateful for that.”

Use these prompts to start your own, helping you stand firm with loved ones when talking about money.

Talking To Your Kids About Money

If you never talked to your parents about money or finances weren’t ever a topic of conversation growing up, you may not know how to talk to kids about money. It’s normal to be confused, especially as you enter new territory.

Just because it happened to you doesn’t mean you have to keep the cycle going. Start as early as possible by gradually integrating age-appropriate conversations about money. 

• Ages 3-5: Simple money discussions about what it is and how it’s used. Show them bills and coins. Allow them to pay for small items in cash when shopping to show what an exchange looks like. If they’re getting money on birthdays and holidays, put that into a kids' savings account.

• Ages 6-9: Once your kids understand how to count money, introduce saving. Help them create a simple budget. If they have an allowance, use that to illustrate their income. This helps them visualize savings and learn the difference between wants and needs.

• Ages 10-13: Expand budget knowledge by showing them how to save for short- and long-term goals. Now they can work for something substantial, like buying a new game or planning a summer trip. Give them the chance to spend their money however they want, so they learn what is important to them. Allow them to participate in your own family budget and be hands-on when grocery shopping to see why you make certain financial decisions.  

• Age 14-17: Open a student checking account where you can see how they manage their digital wallet, but give them more financial independence. Explain the difference between credit and debit cards, show them what credit looks like, including credit scores and reports. Talk about how credit history impacts so much, like buying a home, car, or even taking out student loans for school. 

The Bottom Line

Even if you’ve been in the financial stress cycle, that doesn’t mean you need to stay in it. You also don’t need to continue it. The cycle ends with you.

Stability gives you the chance to build savings and boost your credit score. You can protect your family in both the short and long term with life insurance and by creating a will or trust. Educate your children about money any way you can. And if you don’t know something, learn it together. When you know better, do better. Even small wins can go a long way.