This post explores the surprising impact that early childhood memories have in shaping your lifelong relationship with money. Find out how to build increased financial awareness and harness the power of these money memories for your advantage.
Introducing the Power of Money Memories
I recently listened to a fascinating BiggerPockets Money Podcast that featured Chelsea Brennan (aka “Smart Money Mama“). Towards the end of the show, she mentioned an idea that your core money beliefs are formed by age seven.
At first, I thought this sounded ridiculous and dismissed the idea. It didn’t seem possible that trivial childhood money memories could so profoundly impact lifelong money beliefs. But she went on to make a compelling case. She insisted that by deeply reflecting on moments that might feel unimportant, you can unlock incredible insight into your personal relationship with money.
To initiate the process, she encouraged listeners to think back to the first time they can remember anything related to the concept of money. She warned that the exercise might even take a few days.
I decided to play along. and the perspective that I gained from this reflection shocked me. In fact, I felt enlightened enough that I decided this concept warranted an entire post.
The memory itself is not what matters here. Rather, power lies in building increased awareness around early money memories and acknowledging the ways in which they shape current money decisions. While the process takes patience and vulnerability, unearthing the psychological roots of your financial behavior is worth the effort. Below, I conduct a self-evaluation and explain how my memories have impacted my financial values both positively and negatively. Hopefully this inspires you to do the same.
My First Money Memory
After struggling to think of anything for hours, my first money memory hit me like a truck. At the age of five or six, I received a plastic toy safe. It had a smooth grey exterior with yellow buttons. A coin slot sat on top, and a blue dial jutted from the front. Inside, there were two drawers on the bottom and a shelf that caught everything dropped from the coin slot. I’m sure any motivated adult could’ve pried it open in seconds. But in my mind, it was utterly impenetrable. I can’t explain why or how I remember this toy safe so vividly, but it goes to show the mindshare that these deep-seated money memories occupy.
This safe became my prized possession. Over the next two to three years, whenever I received money for any reason (a chore, holiday gift, dollar from grandpa) I deposited it in my safe ASAP. I began to derive tremendous satisfaction from watching those small piles of bills and coins grow.
Psychoanalyzing My First Money Memory
At first, I thought this memory was amusing yet meaningless. I realized that I had to go a step deeper. I considered the emotions and events taking place around this toy safe to help contextualize the memory.
Anytime my parents saw me funneling money into the safe, they seemed to subtly praise my discipline and unique nature. I heard my mom on the phone chuckling with grandma at the fact that I hoarded her birthday cash in the safe rather than spending it like a “normal” kid. My behavior grew further entrenched by its stark contrast to my younger sister’s actions. She was quick to blow her money on candy, toys, or whatever else my parents would allow her to buy.
Saving money diligently and spending it conservatively became a part of my family identity. And this identity was reinforced by the acknowledgement that I received when my parents reacted with praise and amusement. Garnering the respect and approval of a parent must be one of the strongest biological motivators that a young child can experience.
Thus, my early money ideals took shape. I’m still that young saver at heart today. Little did I know that my core financial values were encoded years ago seemingly by chance.
The Pro’s of My Money Mindset
Increased Savings Rate
Today, my savings rate (the proportion of money that I save or invest from each paycheck) is markedly higher than the average American’s. I attribute this fact to those early memories of the toy safe. A deep satisfaction associated with saving had woven itself into my DNA . Ironically, I can’t even point to anything in particular that I was saving for over all those years. I just know I felt compelled to do it. This mindset has remained with me, and I hope it will provide me with increased financial flexibility and the ability to capitalize on unique opportunities.
Less Impulsive Behavior and Spending
My formative money memories have also shaped me into a more rational thinker and consumer. Due to the high level of satisfaction I derive from saving, I rarely spend impulsively on big ticket items. I admit this is somewhat lame, but the gratification I feel after saving often outweighs the thrill of a purchase. The newest gadget or vehicle release doesn’t move the needle enough to entice me into making a purchase.
This shift away from impulsive behavior has also spilled into other areas of my life in beneficial ways. For instance, I maintain a rigid physical fitness routine despite a hectic schedule and a variety of competing commitments. I frame each workout as a small investment in myself that will stack up to build great results over time. This is similar to the way that saving diligently provides a foundation for powerful long-term wealth creation
Motivation to Invest
Naturally, my affinity towards saving money led me to learn about investing and growing my wealth faster. While accumulating money in a safe felt great, I discovered I could exponentially increase that physical money by investing in assets that would work for me 24/7. Sure, this idea required a paradigm shift. Instead of dropping cash into a safe, I started watching numbers grow on a computer. But the same concept and money values applied. Arriving at this realization early in my life allowed me to amplify the benefits of compound interest over time.
The Cons of My Money Mindset
Overly Conservative Asset Allocation
The intense satisfaction that I derive from saving has clouded my judgement of risk. In other words, my money mindset has caused me to miss investment opportunities that involve elevated risk and massive potential upside. For instance, I hold an excess amount of my net worth in cash despite my 40+ year investment horizon. Mathematically, this is a suboptimal decision, but I place a high value on the peace of mind that a larger cash position provides me.
Now, I’m working to increase my risk appetite. I recognize there will never be a better time for me to make speculative investments given my lengthy time horizon and lack of dependents. But embracing greater risk requires me to actively resist the years of influence that my formative money memories have exerted over me.
Entrepreneurial Doubt and Hesitation
This con relates closely to my tendency to hold a conservative asset allocation. My relationship with money has limited my pursuit of promising entrepreneurial ventures. Without a consistent paycheck, I would be forced to deprive myself of the pleasure that I crave as a result of saving money. Although I consider myself an entrepreneurial thinker and creator, it’s almost impossible to square a self-employed lifestyle with my saver mindset. Scaling a business would require me to invest significant time and money with limited visibility of the expected payoff. Even if I had an idea that I thought carried more than a 70-80% chance of succeeding, the many years spent saving minimal money would overwhelm me. This puts me at a disadvantage to the visionary thinkers willing to sacrifice everything to achieve their dreams.
Spending Anxiety
Assuming a lack of “bad debt” and adequate income, it’s healthy to spend money on things that bring pure joy and happiness. I’ve even actively encouraged this behavior in my post about spontaneous spending. However, my money mindset often hinders the joy that spending should create in my life. With such an instinctual tendency to save, I must constantly remind myself that money is a tool rather than the goal. If I were to structure my entire life around the sole purpose of maximizing absolute wealth, I’m sure I could die with a large number on a spreadsheet. But what’s the point? Money itself is relatively useless if it’s power is not harnessed to create enhanced opportunities, experiences, happiness, and memories in life.
Concluding Thoughts on Money Memories
While it may sound corny, I’m now convinced of the importance that these childhood money memories hold in shaping lifelong money perspectives. Shoutout once again to Chelsea Brennan of Smart Money Mamas for turning me onto this idea!
I hope my self-reflection above helps you more critically evaluate your own relationship with money and financial wellbeing. Remember, this exercise shouldn’t make you feel hopeless. Don’t think: “my money destiny was set by the time I was seven so I’m stuck with it.” Rather, use this exercise to build awareness and acceptance.
Once you’ve identified your transformative memory, go one layer deeper and “psychoanalyze” it to unlock greater context and depth. Then, create a list of pros and cons analyzing the way this memory has shaped your money mindset. The truly challenging part of this exercise comes at the end, as it requires a lifelong commitment. You must strive to build on the positive aspects of your formative memory and neutralize its negative effects. As I can attest, this is easier said than done!