The 6 Hidden Sources Of Financial Trauma—And How To Begin Healing

Forbes

29-07-2025

The roots of financial trauma go deeper than debt. These six sources, ranging from generational trauma to systemic harm, offer a new framework for understanding money wounds.
News headlines and money representing an economy in recession
'I'm doing all the right things financially and still feel stuck.' This is the reality I hear from many of my clients.
Student loan debt, lay-offs, and the increasing cost of housing and insurance might be some of the more easily identifiable sources of financial anxiety and financial stress, but they hardly scratch the surface of what trauma-informed financial planning professionals, financial counselors, and financial therapists are coming to recognize as financial trauma in their clients. Financial trauma is any instance observed or experienced that has a negative impact on the way someone views, interacts with, or believes about money. While it has largely been described as direct and prolonged first-person experiences that impact one's emotional relationship with money – and is often framed through a lens of financial struggle and a scarcity mindset–the definition provided above widens that scope to include six sources of financial trauma I've identified in both my lived and professional experience as part of my proprietary framework 'The 3E's of Overcoming Financial Trauma™' that is explored deeper in my book, Overcoming Financial Trauma: How to Break Free From Guilt, Build Wealth, and Redefine Success (Wiley, 2025). These six sources are:
Naming these sources addresses the psychological impact of money through various lenses that incorporate financial therapy as a foundation with interdisciplinary expansion into the study of epigenetics, neurobiology, and social theory. Through this framing, it also repositions financial trauma as a universal experience rather than its more common framing as an issue that only affects those experiencing financial stress and financial shame due to low income or prolonged experience with poverty.The 6 Sources of Financial Trauma
Generational or genetic financial trauma refers to physical, psychological, and emotional inheritance of attitudes and beliefs that are influenced by financial stress and financial anxiety experienced by previous generations. Through trauma research attributed to Rachel Yehuda, we now have evidence that the effects of stress and trauma can travel from generation to generation. When viewed through the lens of intergenerational trauma transfer, generational financial trauma is one of the six sources not requiring direct experience with the initial trauma and can exist as a form of trauma without context. From an embodied perspective, generational or genetic financial trauma can show up as physical expressions of previously experienced trauma related to money in how genes are expressed or where someone physically holds trauma in their body. When working with clients, it's not uncommon for me to remind them to breathe, to ask them where they feel the trauma in their body, or to recommend a somatic practice as part of overcoming financial trauma.Vicarious or observational financial trauma is another one of the six sources the individual doesn't have to directly experience to be impacted by. Vicarious financial trauma can refer to the negative associations one makes with money due to what they have observed. Whether that's seeing your parents fight and argue over money, hearing an account of a bad experience turned to financial advice from an influencer or someone deemed a financial authority – credit cards are bad, stay away! – or witnessing the way someone is treated due to their financial status, like the criminalization of homelessness. Not only do these observations shape how someone may view, interact with, or believe about money, but they can also shape how the individual wants to be perceived with money, which may contribute to financial shame and money avoidance cycles, due to living above one's means.Financial instability or poverty are the most frequently referenced sources of financial trauma and are usually directly experienced. Job loss, eviction, and repossession are just a few of a long list of triggers that can be sudden and financially traumatic. However, long-term experiences with poverty that are often lifelong speak to a deeper reinforcement of financial trauma that can persist even when the threat of poverty is no longer present.Workplace or employment trauma related to money is an often overlooked source due to socialized norms around the need for employment wages. Workplace trauma can stem from wage theft, discrimination, and exploitation, as well as more nefarious, extreme examples, but can also take subtle forms that show up as workplace culture and expectations that keep the corporate machine running. 'Code switching,' for example, is a practice employed by some non-white employees in predominantly white spaces to indicate professionalism, compliance, or a cultural fit.
Code switching is often subconsciously done in an attempt to engage in economic warfare with the intention of securing, prolonging, or advancing employment, sometimes to the detriment of the employee due to misalignment with their true self. These employees may experience resentment or adopt narratives around workaholism and money as a form of power and control in other areas of their life that lead to burnout or attempts at coping with money stress through vices like gambling, drug or alcohol use, hypervigilance with money, or money avoidance.Institutional financial trauma is another subtle form of financial trauma that is embedded in the financial and educational systems we navigate. Redlining, financial exclusion, and predatory lending are just some of the ways dominant financial systems have caused harm. While the aforementioned examples represent a not-so-distant past across financial systems and institutions, there are present and recent-day examples of institutional harm that show up in banking, real estate, consumer and business lending, credit scoring models, and more. Institutional financial trauma can show up as mistrust in financial systems, the number two self-reported reason for unbanked populations, according to survey data from the FDIC. While it can be tempting to assume that financial literacy solves this problem, addressing the deep-seated psychological impact of money in relation to these systems is a step towards acknowledging the mistrust and works to financially empower people to engage in healing money wounds prompted and exacerbated by financial institutions over time.Familial and societal sources of financial trauma can be perpetuated unintentionally due to cultural expectations related to money. Some examples of this include gendered norms around money like who the breadwinner should be and what associated financial responsibilities look like, religious expectations around money, financial obligation of children to their parents (or parental financial abuse of their children), elder abuse, fraud, and The Black Tax (or adjacent experiences showing up in other cultures).Why Naming the Source Of Financial Trauma Matters
As part of my framework, The 3E's of Overcoming Financial Trauma™, the first E stands for exposure. Naming the source as part of the exposure phase is important because it provides language for what many are experiencing but can't articulate due to financial socialization or a lack of trauma-related information. There is healing power in awareness that allows those impacted by financial trauma and trauma-informed practitioners to identify the source of behaviors that manifest as:
These patterns are often interpreted as personal failings due to the manner in which traditional financial education is delivered, when they are often protective responses to past and continuing harm. That's why in Overcoming Financial Trauma, I offer tools to not just identify these six sources, but actively work towards healing money wounds.What You Can Do Next
Engaging in financial healing is possible. There are several organizations and credentialing bodies that focus on the psychological impact of money on behavior, as well as the four steps to financial healing I identify in my book. If you want to start with a DIY approach or work with a professional, you can:It's important to remember that you are not alone in this. There are professionals, educational materials, collaborative practices, and more that can help you. Financial trauma is real, it's valid, and many people are experiencing it without even knowing it.