Maggie McCombs, 26, a content marketer and social media consultant in Lexington, Kentucky, grew up believing her family was struggling.
Her stay-at-home mom managed the household finances and kept an extremely tight budget, allowing for almost no spending money for anything beyond housing and food.
It wasn’t until McCombs graduated college that she found out her dad, a software engineer, actually earned a sizable yearly salary. So why was her mother so tight-fisted? It stemmed from her dirt-poor childhood on a farm with a dad who had many children to feed. That sense of scarcity clung to her — and she in turn passed along her money worries to her daughter.
“I have a strict budget,” McCombs says. She can afford to upgrade her lifestyle, yet she lives on $2 frozen dinners, can't bring herself to replace old clothes and has put off investing in pricey necessities, like a laptop.

Your Money DNA

McCombs internalized her mom's extreme frugality, and she's now playing out the exact same pattern she grew up with. It's something many of us do without realizing it. “Our research shows that the money patterns we observe in childhood are the primary source driving our financial decision-making later in life,” says Edward Horwitz, Ph.D., CFP®, associate professor of behavioral finance at Creighton University Heider College of Business.
“Children primarily learn from modeling, and we all have a tendency to pick up the behaviors of our parents,” says Brad Klontz, Psy.D., CFP®, founder of the Financial Psychology Institute and associate professor of psychology at Creighton University.
Although environment is the number one driver of how our financial habits develop, genetics come into play, too. Research published in the Journal of Finance in 2015 found that people with a variant of one specific gene, as well as a higher degree of financial literacy, make better money decisions than other individuals. Another 2015 study published in the Journal of Political Economy concluded that about one-third of our approach to savings stems from genetics. DNA also predisposes us to having more or less self control, according to a University of Edinburgh study. That may be key in determining our likelihood to spend.

Leaving Your Family Legacy Behind

While you can’t change your genes, you can stop repeating harmful money habits your parents passed down to you.

Step 1: Make The Connections

Think back to how your parents influenced your money beliefs. Ask yourself: What three things did your mom and dad teach you about money? What is your earliest money-related memory and your most painful money memory? What is your biggest financial fear?
“Addressing these can uncover deep-seated patterns,” Klontz says. “For example, if your parents never talked about finances, you may have interpreted that as meaning that money is unimportant. Whereas people who grew up with spendthrift parents who modeled excessive buying are at risk of inheriting the attitude that more stuff will make them happier. They’re likely to use money as an emotional Band-aid.”
Connecting the dots between family members' habits and your own is a powerful step to activating positive change.

Step 2: Dig Deeper

Once you’ve identified where your own money issues stem from, do some detective work into why your parents had the financial habits they passed to you. Have a conversation with them about their own childhoods and what your grandparents taught them about money. "Many of us are playing out money scripts that our family has been struggling with for generations," says Klontz. "With the knowledge that you are just the next actor in a dysfunctional play comes the ability to write a new story for yourself and for future generations."
Klontz did this after he dealt with money struggles early in his career, taking big investment risks and subsequently losing a great deal in the 2000 dot-com bubble. His mother was always careful and risk-averse with cash, so he asked her about family money habits to find out where his risk-taking behavior may have come from.
During their discussion, he discovered that his grandfather had lost all his money in the Depression and had never put a dollar in the bank since, instead squirreling away cash into a lock box in the attic. “It helped me understand my mom's anxiety about money,” Klontz says. So did his own behavior. "I concluded that my family's fear around investing led to poverty, so I swung to the opposite extreme, which led to my losing it all." With this awareness, Klontz invests more prudently.

Step 3: Rewire Your Money Habits

Let’s say your parents instilled the idea that rich people are greedy, and as a result, you engage in self-destructive behavior that sabotages your ability to make or keep cash. First, question why you developed that concept. Maybe you grew up poor and denouncing wealth was your parents’ way of rationalizing that it’s OK to be underprivileged.
Next, challenge the accuracy of that, suggests Klontz. For instance: Some rich people are greedy, but others do incredible things to make the world better. I want to be one of those people. I will use my money to provide my family with positive experiences and to do philanthropic work. It is OK to have more money than I need so that I can achieve those goals. Repeat this truth or write it down whenever you find yourself slipping into old habits.
Just keep in mind that while some people may be able to reverse their bad habits on their own, many need professional guidance. Check out the Financial Therapy Association to find psychologists skilled in helping people navigate money-related behavioral change.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.