For most of us, we hold deep and fond memories of our childhood. Looking back, I miss my carefree childhood days where I have the freedom to play and not worry about making a living and paying bills.
As a wealth adviser, I have the privilege to listen to my clients share more about their childhood and how it shapes their money belief today. Our clients begin their planning process with a meeting called Discovery Meeting, at which we make use of coaching questions to encourage self-discovery. The objective is to help our clients gain clarity on their life purpose, money values and priorities. This information, together with their financial numbers, is essential for us to create a wealth plan that truly reflects the things that are important in their lives.
One of the questions we ask our clients is, “What is your money value?”. In other words, we want to understand how they perceive the role of money in their life. Most of the times, we get answers like:
- Money is for security
- Money is to provide for their loved ones
- Money offers them freedom and options in life
From here, we will delve deeper to ask clients where they get these money values from. Often, this is when clients share about how they internalise their childhood experiences that shape their belief system today.
Our childhood has profound effect on how we make decisions as adults, whether we realise it or not. Some lead to positive outcome, but some not. This does not mean that our parents are to be blamed for our money mistakes. I hope through this article, I would be able to create the awareness that our past affects how we behave around money today.
Seeing our parents getting into a huge debt
Most of us know that our parents owe a mortgage when we are young. However, it is a different story if we witness our parents spiralling into a debt cycle that they cannot get out of, perhaps due to a failed business or over-leveraging on an investment. It could get so bad that the family’s day-to-day lives are affected because the parents must cut back on basic expenses. That is going to have a knock-on effect on how the child views debt when he/she grows up.
A frequently asked question by our clients is “Should we clear our debt if we have the money?”. To us, it is a deeper question than simply anticipating future interest rates and potential returns. Beyond thinking of it as financial and investment decision, there is an additional layer about making a life decision. For example, if we had understood the clients’ aversion to debt due to an unpleasant childhood experience, the appropriate advice could be to suggest the client to make a life decision to pay off the debt.
Witnessing your parents get burnt by the stock market
It is not uncommon to hear from clients that they feel uncomfortable investing in the stock market, despite knowing that there is a need to invest to achieve their life goals.
Some clients would share about how their parents lost their hard-earned money when they invest or trade in the stock market. This is made worse if they had witnessed their parents arguing over money at a young age. Naturally, when it is now their turn to grow their own money, they steer clear from the stock market to avoid undergoing a similar experience with their spouse.
On the flip side, if they had witnessed their parents make their first pot of gold through property investing, especially in Singapore, then property becomes their go-to investment. It can be a risky endeavour if one does not try to understand enough about this asset class and its future performance.
Parents were rarely around as they pursue their career and perhaps, more money
For someone who had experienced parental absence during their childhood, they might make these deliberate money decisions to prevent their children or loved ones from going through a similar experience:
- Opt for a career, usually at a lower pay, to enable them to spend more time at home
- Devote more energy into optimising their finances
For them, it is not about pursuing more for the sake of having more.
Comfortable childhood with no money issue because of stable income
A client once shared that her decision to pursue a career as a civil servant was influenced by her parents. Her growing-up days were comfortable and stress-free because her parents had stable income working as civil servants. Even after they retire, they continue to receive pensions and live comfortably. Like them, when we were planning her retirement, she hopes to prioritise safety and reliability over pursuing potential higher returns, which also means higher risks.
Often, we hear this saying that “A child’s brain is like sponge. It soaks up what they see and hear.” As we enter adulthood, we tend to look at people closest to us and model our behaviours around theirs, consciously or unconsciously. If we find ourselves behaving differently from the social norms with regard to money issues, we could perhaps find the answer in our childhood memories. If the issue is serious enough for you, it helps to find someone you trust or an independent professional to talk about it.
This is an original article written by Loh Yong Cheng, Lead of Advisory Team at Providend, Singapore’s First Fee-Only Wealth Advisory Firm.
For more related resources, check out:
1. Story of Yong Cheng: The Little Things That Make Him Feel Warm and Fuzzy
2. Can You Trust Your Head When You Invest?
3. Should I Get Professional Wealth Advice?
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