How to Overcome Your Money Mindset Issues If You Grew Up Poor

Everyone loves a great rags-to-riches story—but there is also a feeling among many of us that those stories are nothing but myths. You might think: Yes, it may be possible for anyone to become rich, powerful, and famous in America, but it’s certainly not going to happen to me or anyone I know.

As it turns out, there is a clear psychological reason for that skepticism. According to a recent study published by the American Psychological Association, growing up poor can lead to a loss of your sense of control when you are faced with uncertainty. Growing up wealthy, on the other hand, means that you tend to feel a greater sense of control when dealing with uncertainty. And feeling out of control can lead to detrimental behavioral patterns, such as opting for immediate gratification.

Basically, feeling as though you have control over your life is a big factor in making good financial decisions.

Whether you grew up like the Rothschilds or a like a Dickensian orphan, it’s important to learn to foster your sense of control. Here’s what you need to know about how your childhood socioeconomic status might still be affecting your finances:

Locus of Control

The sense of control that the APA study is referencing is often referred to as a locus of control. According to psychologists, individuals see the ability to control the events in their lives as either being internal—meaning they the have control—or external—meaning control is out of their reach.

For instance, an individual with an internal locus of control who flunked a test would think that he did not study hard enough and would decide to do better in the future. If he aced a test, he would see that as evidence that he prepared well.

Someone with an external locus of control, on the other hand, might think she got a poor grade because the test was too hard or the teacher wrote bad questions. And if she did well on the test, she might attribute the A to luck or the teacher being too easy on her.

Your locus of control can strongly affect your financial life. For instance, psychologists have found that individuals with an external locus of control are more likely to carry debt. Experts theorize that this is because an external locus of control leads to a sense that nothing you do matters, since there is no beating banks or “The Man”. With that attitude, there is no compelling reason to get out of debt.

Individuals with an internal locus of control, on the other hand, recognize that all of their financial decisions are entirely within their control, which means they make proactive decisions about their money.

Protective and Reactive Behavior Patterns

Generally, individuals who grow up poor are attempting to protect themselves when they develop an external locus of control. The APA study found that people who grew up without much money are more likely to take a small, immediate reward instead of a larger, later reward.

In the context of a financially tumultuous childhood, this behavior pattern makes protective sense. When you do not trust that the outside world will treat you well or fairly, then you are likely to grab what you can when you can. Unfortunately, this kind of impulsivity is part of what leads to higher debt among those with an external locus of control, and it makes it very difficult to get ahead financially. Waiting patiently for a larger, later reward is what investing is all about, after all.

In addition, feeling as though you do not have control can also affect your determination. One part of the APA study asked participants to recall a moment of financial uncertainty before giving them an unsolvable puzzle. Those participants who had grown up poor gave up on the puzzle 25% sooner than those from wealthier backgrounds. This is a reactive behavior pattern—the world is too tough and I just can’t get ahead!—that can hold you back.

Just imagine how many people have given up on their dreams at the first setback because of such reactive behavior patterns.

Changing Your Sense of Control

The good news is that it is possible to move your locus of control. The authors of the APA study found that asking participants to recall situations when they felt in control helped to ameliorate their sense of loss of control. That’s because having confidence in your abilities causes you to try more often, usually bringing more success and more confidence.

If you tend to feel out of control when you are facing economic uncertainty, think of a time when you handled a problem in a way that you were proud of. The problem does not even need to be financial in nature. Any time you felt in control can be helpful.

The next time you face economic uncertainty, focus on that memory of being in control before making any decisions. Recalling that sense of control can help you to maintain it.

Mind Over Matter

Successful people know that looking within is the only way to realize your dreams. But counting on yourself can be very difficult if your childhood taught you that you cannot control your circumstances. Unlearning that lesson and reversing detrimental behavior patterns is not easy, but it is possible to reprogram your sense of control—and improve your finances.

Emily Guy Birken About Emily Guy Birken

Emily Guy Birken is an award-winning writer, author, money coach, and retirement expert. Her four books include The Five Years Before You Retire, Choose Your Retirement, Making Social Security Work For You, and End Financial Stress Now.


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  1. Great article. Education is a great equalizer between rich and poor.