Not only do we inherit facial features from our parents, but also our tendencies to spend impulsively, our ability to save, and our willingness to take risks with money. Let’s find out what financial behavior scientists believe can be inherited and what to do about it.
The way our parents (and grandparents and other close relatives) feel about money shapes our financial behavior to some extent. This is called the “money scenario,” a term coined in 2009 by psychologist Bradley Klontz.
In 2011, Klontz, with a group of other psychologists, conducted a study and identified four categories of money scripts that we can get from relatives. Here they are:
- Money worship. This is the belief that money solves everything and can buy anything: happiness, health, love. Such people strive for high earnings and even wealth.
- Money as status. The more money people with this scenario have, the higher their self-esteem. They may buy status things they can’t really afford and overpay for services just to make others think they have money.
- Money Avoidance. “If you didn’t live rich, you shouldn’t start”, “the rich also cry”, “it’s not the money that makes you happy” – these are the beliefs of people with this money scenario. They believe that money can bring evil and unhappiness, and even feel guilty if they start earning more than others.
- Money Vigilance. Such people are frugal and like to save money. At the same time, they can go overboard and sacrifice pleasures and even health to achieve their financial goals without realizing it.
To find out your money scenario, ask your parents and grandparents (if possible), observe them or remember how they behaved, how they treated money, whether they used proverbs about wealth, how they spent and saved.
Keep your scenario in mind every time you make important financial decisions.
If you can’t learn to save, it may not be a matter of willpower, but rather a genetic predisposition. In 2015, Stephan Siegel, a professor of finance and business economics at the University of Washington, studied the behavior of over 30,000 twins and found that our financial habits are 33 percent genetically determined.
According to the scientist, people are born with a strong predisposition to certain types of financial behavior, such as saving money or spending everything in the wallet at once. Upbringing and environment contribute, but their influence can diminish over time.
If you have children, you can exhale. Even if you nurture their savings habits from birth and demonstrate sound financial behavior in every way possible, children can still grow up to be spenders. Conversely, if your financial literacy is far from ideal, your child will still have a chance to save a fortune.
But you shouldn’t attribute all your financial failures to genetics. If saving is more difficult for you than for others, you should automate it or connect game techniques.
Another study by scientist Stephan Siegel focused on investments. He found that genetics explained about a third of the differences in investment behavior and asset allocation.
How risk-averse you are – whether you are cautious and save your money in bonds, try to get more with live in-play betting, carefully balance your portfolio, or invest most of your money in cryptocurrencies – depends in part on genetic predisposition.
If your parents were not very successful at investing, it’s worth assuming that their style of investing may have been passed on to you. Perhaps you should reduce (or, conversely, increase) your risk to earn more. Or explore new tools to help diversify your investment strategy.
Impulsivity is also inherited. Psychiatrist Andrei Anokhin and his colleagues at Washington University School of Medicine studied the behavior of 602 twins and found that the tendency to make impulsive decisions may be inherent in the genes.
People who get the “impulsivity gene” can make decisions on emotion, without much thought and weighing the pros and cons. This affects all areas of life, including finances.
You need to be more self-aware: don’t keep too much money readily available and don’t go shopping in an emotional state of excitement.
Researchers at the London School of Economics have observed that cultural and financial customs are inherited, even if a person has left their country. They studied the children and grandchildren of migrants who were born and raised in a completely different environment, but who absorbed the habits of their parents and grandparents.
For example, the descendants of Chinese immigrants born in Britain were more likely to save than their British peers, because the habit of saving is more developed in China.
Analyze your family’s financial habits. Look closely at those that may lead to excessive spending or interfere with earning money.
Habits pop up unconsciously, often when we are under stress. If you know them “in person,” it will be easier to control yourself.