The Truth About Generational Financial Trauma

Forbes

05-08-2025

Generational financial trauma has a profound impact on your relationship with money and often starts before you are born. This article explores the first of the 6 hidden sources of financial trauma.What Is Generational Financial Trauma
Generational 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. People often feel the effects of this source of financial trauma without direct experience with the original trauma, or as a compounding variable present in the trauma from their lived experience. Many of the scripts you carry about money come from what you have seen, heard, were told, or felt as a child. The idea that 'money is the root of all evil,' or that 'the banks are going to steal your money if you keep large sums there', may come from the experiences your parents, grandparents, and great-grandparents had and have passed down consciously or unconsciously through their words and actions.In my forthcoming book Overcoming Financial Trauma: How to Break Free From Guilt, Build Wealth, and Redefine Success (Wiley, 2025) I discuss my 2019 TEDx talk where I describe the feeling of 'aspiring to be poor' that came as a result of observations and associations I made about money from watching how it was managed in my household. This feeling didn't come from a direct conversation or explicit instruction; it came from a survival-induced reaction that planted a seed that grew into what felt like a natural and rational aspiration. This may present what has classically been referred to as the nature vs. nurture phenomenon. The belief that socialization and exposure to education, or a lack thereof, have the greatest influence on individual outcomes. That is because although generational financial trauma is often discussed through the lens of attitudes and beliefs that impact behavior, it's not as often discussed from a physiological or embodied perspective.
What Epigenetics Tells Us About Money Trauma
The study of epigenetics explores how gene expression can be influenced by the environment without fundamentally altering the original gene structure. When trauma researchers like Rachel Yehuda began to explore epigenetic impact on the expression of genes by way of stress and trauma, what they found was astounding: that the environment of stress–like that of financial anxiety caused by financial instability or economic oppression–can have a biological impact on gene expression in current and future generations.Despite trauma research not being performed through a financial specific lens, this provides a completely different dimension to the idea of generational financial trauma, as this research supports the expansion of how financial trauma is recognized from experiences that impact attitudes and beliefs, to biological responses that impact inherited sensitivity to financial stress via cortisol responses and hypervigilance with money despite never experiencing the trauma directly. Epigenetic inheritance doesn't require storytelling or modeling. It only requires exposure in previous generations.When discussing financial trauma with some audiences, I get responses like 'I didn't have that experience!' or 'Fortunately, I've not experienced financial trauma because growing up, we've always had money.' This presents two myths that should be dispelled in financial wellness and education conversations:
These myths perpetuate harm in a few ways including but not limited to the rewarding of stress responses expressed with money at high income levels, but demonization of those same responses expressed at lower income levels and, targeted weaponization of guilt and shame infused financial literacy curriculum against individuals impacted by generational financial trauma whether viewed through a nature or nurture perspective.
It also leaves vulnerable the population of high earners struggling with financial trauma who experience guilt or shame for seemingly getting it right on paper, but don't have the vocabulary to describe why they engage in the cycles they do, because they have money.
How Generational Financial Trauma Shows Up In Your Life
Generational financial trauma can show up in your life both psychologically and physiologically, with more emphasis often placed on the psychological impact. Due to financial socialization and normalized overstimulation, individuals can easily overlook the body's response to the real or imagined threat associated with money. The tightness in your chest when making spending decisions or overreaction to financial stressors are common physical symptoms of financial anxiety, but epigenetic expression can modify those responses genetically as altered cortisol receptor expression, or it may contribute to lower resilience or exaggerated stress responses when navigating financial challenges. These physiological impacts, either originating with you or prior generations, have a profound impact on how you may seek relief through money behaviors that would classically be considered poor financial decisions.Psychological effects of generational financial trauma can show up as a scarcity mindset, guilt associated with financial success, or hypervigilant associations with money as a form of control or validation.
Why We Don't Talk About Generational Financial Trauma
The truth is that as financial trauma grows in recognition and popularity, there are increased discussions about generational financial trauma occurring; it's just occurring through a lens of poverty and financial struggle almost exclusively. Additionally, the acknowledgement of epigenetic impact creates an avenue for discussion around the convergence of racialized and institutional trauma on the present day financial circumstances of the descendants of exploited groups, starting with enslaved Africans at the establishment of the United States of America.While epigenetic and intergenerational trauma research continues to emerge, its convergence on behavioral finance and subsequently the way financial education is delivered is both timely and promising.There may also be a taboo among high earners to explore the generational impacts of financial trauma due to socialized pride in seemingly escaping its clutches. It's important to reiterate that money alone will not insulate you from the impact of financial trauma in its various forms and expressions.
The First Step Toward Healing Generational Financial Trauma
Whether your money wounds were due to inherited money beliefs modeled in childhood or silently embedded in your body's stress response, naming them is the first act of power in changing your money mindset, which is why in my framework, The 3E's of Overcoming Financial Trauma™, the first E stands for Exposure. I explore this framework deeper in my book, Overcoming Financial Trauma, and the workshops and lectures I give, starting with explaining the 6 sources of financial trauma.Once you can name the sources of financial trauma, like generational financial trauma, and understand its impact, you can begin to consciously audit the behaviors, beliefs, and responses (both physiological and psychological) you have to money. Some questions I often ask my clients include, 'Do you feel safe in your body when you think about money?' or 'Are you financially irresponsible, or are you just spending money in an attempt to regulate your nervous system?'To close out, I'll ask you the same. Feel free to comment directly to share your thoughts or responses.