Still, it’s not the only type of trauma that can impact our money behaviours.
Really any trauma, even those unrelated to finances, can shape how you use money. Simply put, trauma is an emotional wound that impacts our self-worth and security.
Any negative experience around worth and security can challenge or influence money behaviours and habits, in addition to how safe we feel and how we feel about ourselves.
In general, money trauma can stem from a variety of life experiences, including:
- Generational trauma: Distress passed down genetically and/or through nurture. (For example, a grandparent growing up poor or during war could pass down feelings of not feeling secure with income.)
- Relational trauma: Situations like abuse, abandonment or neglect, which are typically experienced with caregivers or other close relationships.
- Societal trauma: Threats and psychological harm targeted at a collective social group. (For instance, experiencing discomfort in managing personal finances as a woman due to patriarchal conditioning or enduring perpetual comparison to others driven by consumerism.)
- Systemic trauma: Institutional-level harm from broader systems like racism and capitalism. (This might manifest in various forms, like a strong aversion to debt stemming from societal trauma caused by redlining, predatory lending tactics aimed at marginalized groups, or other detrimental systems contributing to the racial wealth gap.)
- Scarcity mindset: The brain has a hard time differentiating between real scarcity and perceived scarcity, so experiencing either can impact the brain in a similar way to a trauma response. Real scarcity occurs when fundamental resources for survival are lacking. On the other hand, perceived scarcity may involve having our needs met but feeling as though we are lacking due to past experiences or comparing ourselves to others, perhaps through platforms like social media.
Financial trauma can impact the way we use money by impairing some of our cognitive functions. When in a trauma-activated state, we have less access to the areas of our brain that help us with long-term goal setting, decision making, rational thinking and impulse control. Responses to money trauma have shown that it temporarily disrupts speech or lowers IQ.
Although everyone’s experience of trauma is unique, the outcomes tend to manifest through a collection of similar symptoms:
- Hypervigilance
- Hopelessness
- Worthlessness
- Sleeplessness
- Numbness
- Flashbacks
- Memory loss
- Irritability
- Overwhelmingness
- Lack of concentration
- Chronic pain
- Loss of sense of self
When left unaddressed, trauma can lead to unhelpful money habits, such as compulsive spending, risk aversion, financial avoidance, and relational money disruptions such as financial infidelity. Trauma is often a catalyst for financial shame, too. Money trauma survivors may also experience shame for positive things, like getting a raise, buying a home or even getting support on a debt recovery journey.
A recent study by Coast Capital about financial shame demonstrates what that looks like in action: 63% of Canadians take some measure to avoid dealing with their finances, and 56% say financial shame is impacting their relationships with friends and peers.
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