I’ve talked to thousands of Canadians about their money and debt over the last 14 years. Many have said they’ve never been "good with money", mostly because they never got the right guidance or didn’t see a strong example of someone who was good with money growing up. This lack of financial guidance impacts many of our clients' financial health well into adulthood, including debt.
Not being "good with money" can show up in a few different ways, such as not having any savings to cover an emergency vet bill or dental cost, or having debt payments so large they cause you to put items back at the grocery checkout. Both can be incredibly disempowering and demoralizing experiences, ones we most definitely want to protect future generations from.
How might we do that? Telling our children that money doesn’t grow on trees and teaching hard lessons about the value of a dollar? Or, telling them that money comes and goes, so there’s no point in trying to gain control of it?
We might discourage them from spending money for pleasure. Or, the opposite – to seize the day and buy whatever they want!
Safe to say, we pass on our financial lessons and hardships to future generations in more ways than we can measure. This dynamic can be compared to intergenerational trauma.
What is Intergenerational Trauma?
Trauma is a word that we see often without a very clear definition.
The misconception is that trauma is an event when it is actually a "response to a distressing experience". That response can include losing a sense of personal safety, having trouble forming or keeping relationships (personal and professional), and depression or anxiety.
Intergenerational trauma is when that response is sent down to younger generations via unresolved distress.
What Does Intergenerational Trauma Have to Do with Money?
If we trace our ancestry, some of us don’t have to look too far back to find hunger, homelessness, or systemic discrimination preventing us from having our basic needs met; all of which can be traumatic.
There are many different kinds of traumatic events. Most are outside the scope of this blog but what they have in common is the powerlessness of the survivor in the situation.
The worry of not being able to afford our basic needs is distressing. If we had the power to choose our circumstances, we’d likely choose abundance and prosperity over scarcity and lack.
But our attitudes about money come from somewhere, and they likely come from something we've witnessed during our formative years. And usually, these attitudes are either replicated or rebelled against.
For example, if we witnessed caregivers who were constantly worrying about money while growing up, that can drive us to become super savers or compulsive spenders into our adult years.
Or, if we witnessed uncertainty about money in our home, it wouldn’t be surprising if we didn’t learn how to manage money ourselves once we ventured out on our own. We might also lack confidence in our own ability to make financially sound decisions.
How is Debt Traumatic?
Debt is a symptom of your money not stretching far enough to meet your needs and wants. And your debt is essentially a contract with a lender indicating they have a right to your money before you do.
If you’re making your payments on time and as agreed to, then debt can be quite manageable. But if you rack up a balance on your credit card and start to fall behind on your payments, you’re in for a distressing time.
This could lead you to take on high-interest debt to help keep up with payments, but eventually, you may fall behind on that debt, too. If that happens, creditors will be looking to be paid. They can start calling you on your mobile phone, send you letters, or even contact your employer.
Having creditors demand payments you can’t make can lead to feelings of powerlessness and distress. It wouldn’t be unusual to have a traumatic response to unmanageable debt. Loss of appetite, sleep, and focus, plus changes in mood can all signal a traumatic response.
How Does Intergenerational Money Trauma Impact Debt?
People can end up in debt for many different reasons, but the driver for avoiding or accumulating debt is usually money management.
If we’re planning and spending in such a way that gives us more debt than we can manage, we might be managing our money via our trauma responses.
For example, consider the following phrases: “I never got to buy the expensive jeans when I was a kid, so I’m buying them now!” Or, “Toothpaste is on sale. I don’t know if I’ll have the money later so I should buy as much as I can now.”
Our experiences and relationship with money growing up can impact our spending decisions as adults.
It's also difficult to make financially sound decisions when we feel a sense of panic. For example, during the pandemic, many people experienced "panic buying" as they stockpiled toilet paper and other products.
Using Credit to Fill the Gaps In Our Budget Is a Recipe for Money Trauma and Debt
We’ve become comfortable with using credit to fill gaps in our household budgets or for our leisurely expenditures.
For example, 53% of Canadians are $200 (or less) away from being able to keep up with expenses and debt payments plus the national consumer debt-to-income ratio has reached new heights.
Collectively as a country, we’ve cushioned ourselves from the experience of financial lack with credit and debt.
Many of us are also part of the first generation in our families to have access to online loans and many different types of lenders.
We can get a hold of money faster than our parents could. We can spend it faster, too. Couple that with not having seen an empowered example of money management and we can start to see why 53% of Canadians are at a financial risk.
Overcome Debt with Credit Canada
Since trauma and debt both involve powerlessness, step one would be to take some of that power back.
If you’re feeling as though you’re losing control of your spending, using our budgeting tool could be a good exercise in taking some of that control back.
If you're at the point where you are struggling with debt, contact us to speak with one of our caring counsellors. They could help determine a solution that could make it easier to get rid of your debt. There is no need to suffer through it. Our mission is to help you get out of debt and back into life!
