Think about your parents.
Now think about money.
What kinds of ideas, images, and feelings come to mind?
Do you recall any discussions about money – or were these hidden from you?
Was there always enough to go around – or were you ever-conscious of its absence?
What little incidents do you recall that ended up becoming defining ‘money scripts’ of your life?
Perhaps it won’t be a shock to learn that just as we learned how to raise children from our parents, we also learned how to think about money from them. And as we will raise our children the way we were raised unless we choose a different path, we will also pass on our ideas about money – unless we decide differently.
Today we hear from Dr. Brad Klontz, co-author of the book Mind over Money: Overcoming the Money Disorders That Threaten Our Financial Health (Affiliate link), who helps us to think through the money scripts we want to pass on to our children – and how to adjust course if we decide we need to do this.
Find more information from Dr. Klontz on his YouTube channel.
Other episodes in this series
This episode is the first in a series on the intersection of parenting and money. You can find other episodes in this series:
Click here to read the full transcript
Jen: 01:36 Hello and welcome to the Your Parenting Mojo podcast. Today’s episode kicks off what I’m hoping is at least going to be a miniseries on issues related to money and economic privilege, although I’m still in the process of figuring out exactly where we’re going with this. So, quite a long time ago now, we talked with New York Times columnist, Ron Lieber about money and we got a high level overview of some of the problems we can face when we’re thinking about how to talk with children about money. So, things like from what information to give at what age and what to do when your child nags you to buy something that they want at a store. But a friend recommended that I read the book that our guest today co-wrote with his father. His father is Dr.Ted Klontz and the book is called Mind over Money: Overcoming the Money Disorders That Threaten Our Financial Health. So our guests, Dr. Brad Klontz holds a Doctorate in Psychology. He’s a certified financial planner. He co-founded the Financial Psychology Institute and he’s an Associate Professor of Practice in Financial Psychology at Creighton University Heider College of Business. So, we’re here today to take our conversation on money to the next level by thinking through how our own relationship with money will impact our children’s relationship with money. Welcome, Dr. Klontz.
Dr. Klontz: 02:45 I’m so happy to be here and I’m really happy that hopefully I can get some parenting mojo and a conversation too.
Jen: 02:51 Do you have children?
Dr. Klontz: 02:52 I do. I have 2 children.
Jen: 02:53 How old are they?
Dr. Klontz: 02:54 I’ve got a 6-year-old and a 2-year-old.
Jen: 02:57 Oh, okay.
Dr. Klontz: 02:58 And it’s sort of amazing what they’re already reflecting back to me on what I’m sort of unconsciously teaching them around money.
Jen: 03:03 I can imagine. Okay. So, you should know that it’s perfectly fine to share personally learned lessons with us.
Dr. Klontz: 03:09 Okay, I’ll do my best.
Jen: 03:11 All right, cool. So, let’s dive right in. I wonder if you can kind of get to the crux of your book, which I think is about this idea that you call money scripts. What is a money script?
Dr. Klontz: 03:20 Yeah, so I got really curious. I grew up myself in a, my mom likes to say we were middle-class except lower. And I said, well, they have words for that, but we don’t have to say what those are.
Jen: 03:30 Yeah. We need to say them.
Dr. Klontz: 03:32 Right. But I became really curious at a young age, I was surrounded by a loving family of real hard workers who never seem to really get ahead financially. And so I sort of had that inquisitive mind, I think as a child. And so going through my adolescence and then later on professionally, I was always really curious about how people look at the world differently, whether it’s different religions or different sort of socioeconomic backgrounds. We all sort of have this worldview and it sort of collects around people who are similar to us. So, I became really curious. That’s sort of the framework.
Dr. Klontz: 04:04 And so a large part of my research into the realm of financial psychology has been looking at what we call money scripts, which are these beliefs about money that are passed down to us, typically from our parents, our grandparents, our culture, society at large. You know, these are things that sort of get into our subconscious mind around what money is, what’s possible, how the world works. And then my research has really been focused and by now we’ve done research with thousands and thousands of people on how these beliefs predict things like your income, your net worth, your financial behaviors, and a whole host of other financial outcomes.
Jen: 04:43 Okay. And so what are some of these money scripts?
Dr. Klontz: 04:47 So, we found four main categories and what we did is we collected basically beliefs around money that we worked with people around. And so we had some tools that you saw in the book Mind over Money to sort of draw these to the surface. So, we collected all of these and then we put them into a test. And as I mentioned, we’ve given it to thousands of people thus far. And we found some patterns and so we found four main patterns. The first one is what we would call money avoidance and this is where we have a negative association with money and in true for all of these money scripts, they come from really valid experiences that have happened to you as a child or your parents or grandparents or sometimes even further back in your family history, but it’s a negative association with money, so things like rich people are greedy, money corrupts or there’s virtue in living with less money.
Dr. Klontz: 05:33 Now, no big surprise, and this is true with the next couple of categories I’m going to describe to you, if you have those beliefs around money, it’s going to be damaging to your financial health and sure enough, what we found is that people with this belief pattern tend to sort of undervalue themselves financially at least. They end up having lower net worth and they engage in some self-destructive financial behaviors, which makes sense. If you have this negative association with money, chances are you’re probably gonna to repel it or try to get rid of it when it does come into your life. The next category we found is what we would call money worship beliefs. And this is sort of, I would say, ubiquitous in our culture. This belief that money is going to somehow magically make my life better, take away all my problems and finally get me to the place where I can be happy in this world.
Dr. Klontz: 06:20 And of course this leads to a lot of consumerism. So, what we’ve noticed in our studies, people have a tendency to overspend, spend more than they make, really be attached to stuff because we sort of make that belief money and stuff will make us happier. And of course there’s been a lot of research done on this and it’s certainly true. It’s absolutely true that money will make you happier up to about middle-class. And that’s sort of where we feel like, okay, so we’re okay. Above that, there’s really no significant correlation between money and happiness, a bunch of studies that’s been done all over the place. And so for many people, again, like if you’re trying to climb that socioeconomic ladder to get to stability for your family, a roof over your head, clothes, taking care of your children. Absolutely. But above that, there’s really no significant correlation.
Jen: 07:07 It’s kind of amazing, isn’t it, considering how we still pursue it beyond that point?
Dr. Klontz: 07:12 Yes. Yes. Right. So, this is something that I keep studying because I’m like, of course not. Come on. So it’s one of those things that I think confuses researchers.
Jen: 07:20 Yeah.
Dr. Klontz: 07:21 But you know, I work with a lot of people who are, have money and have means and it’s totally true. Like wherever you go, your humanity follows you and whatever you’re worried about in terms of health and children and meaning in life and purpose, none of that gets erased depending on how much money you have. So it’s sort of this, we call it a hedonic treadmill in psychology too where we’re always sort of striving to get to the next place. And what you learn over time is that it doesn’t fundamentally change who you are or your experience of life when you get to that new place, we sort of become accustomed to it.
Dr. Klontz: 07:50 It’s a bit of a curse of humanity, if you will, which has actually led to a lot of advancements because we’re never sort of satisfied. So there’s the good part. But the bad part is that if you believe that somehow money is going to magically solve all your problems and make your family closer and your marriage better and all this sort of thing, it’s not. And so the message I always give to people is really strive to be happy now. That’s sort of the practice because then when you get money and more money, you can use that to definitely accentuate that happiness, but it’s not gonna magically make you happy. The third category we found is what we call money status. And this is where we’re really linking our self-worth with our net worth.
Dr. Klontz: 08:32 And some other items on this particular scale are, you know, I tell people I make more than I actually do, or I’ll only buy something if it’s new, really focused on that outward display of value and of wealth. And in our studies we found that people who come from lower socioeconomic households are more vulnerable to this type of belief. And I see it all the time in social media too. There’s this belief that wealthy people and rich people live a life of luxury, have very expensive watches and cars and mansions. A bunch of studies done on this and we did one, actually you mentioned Ron from the New York Times, I did a study with Paul Sullivan in the New York Times where we looked at the psychology of wealth as well as spending habits of ultra-wealthy compared to middle-class. And it sort of confirms the classic book, The Millionaire Next Door, where it turns out that if you actually do want to climb that socioeconomic ladder in terms of net worth, it requires you saving money, not spending it.
Dr. Klontz: 09:30 And so as a culture, I think, well we do, we have a real misperception on how people who have money, how they actually spend money and it’s a gross exaggeration of how much money they spend. In our study, for example, we saw that the ultra-wealthy in our study had about 18 times more money than the middle-class comparison group, but they spent only about twice as much on things like cars, houses, vacations and watches. Well, those exact things. So those are the things we asked people how much they spend on. And which by the way is great. I mean like having a house that cost twice as much is probably twice as good, but it’s also not 18 times as good. And so for me, that really drove home the point and it’s definitely true anecdotally with the clients I work with, a lot of them are just really hard workers.
Dr. Klontz: 10:15 A lot of hard workers across all the socioeconomic spectrum, but had a real value towards saving money. Like this was something built into their consciousness. They started early, they were saving 10, 20 sometimes 30% of every dollar they made. And when you start doing that in your 20s and 30s it’s almost impossible unless you do something really stupid for you not to be a millionaire a few decades later. So anyway, that’s the money status and that’s, I’m sort of like challenging some of those beliefs as we’re talking. The fourth category, and there’s some good news here, there’s a good one for you and we called it money vigilance. And this is the belief that it is important to save for rainy day. I put that item in our studies now I sort of surprised at the number of people who actually don’t believe that’s true.
Dr. Klontz: 10:56 So these are people who believe it’s important to save for rainy day. They’d almost, they’d be a nervous wreck if they didn’t have money saved for an emergency. So there’s, we call it vigilance because there’s some anxiety associated with it. Like this is something I need to pay attention to and be vigilant about. I mean, of course that’s good for your net worth. I mean that’s good for your income too. So they had much better financial outcomes and this is across a bunch of different studies. So people who are doing better financially have better financial health, are taking care of themselves financially are more likely to endorse that money vigilant belief pattern. And interestingly part of that belief too was they trended towards sort of minimalism in the sense that they would actually, if somebody asked them how much they made, they would probably tell them they made less than they actually made. So there was some secretiveness around how much they were making. Now interestingly, not within their partner relationships, so they weren’t lying to their spouse around money. Some of the other categories were, but much more likely to sort of downplay how much money they have.
Jen: 11:54 Okay. And so you kind of alluded to where these money scripts come from and that they come from our childhood, they come from potentially further back even in our family than that. I’m curious about how things like shame and stress connect to where our money scripts come from.
Dr. Klontz: 12:11 Yeah. So you know, shame and stress are very profound influencers in our lives. And in terms of stress, money is the number one source of stress in the lives of Americans. And the American Psychological Association does a survey every year and they’ve been doing it since 2007 and it kind of doesn’t matter what’s happening, about three out of four Americans are identifying money as the biggest source of stress in their lives, which is always a little bit ironic too, given that we’re the richest country in the world at the richest time in human history. But this is how much it consumes our emotions and our psyche. And of course a big part of that stress, when we’re talking about money scripts, is how we are comparing ourselves to those around us. That actually creates the stress. It actually doesn’t have anything to do really with objectively how much money you have.
Dr. Klontz: 13:00 And this is something in psychology called the Theory of Relative Deprivation. And it turns out that our subjective well-being, so how good we feel like we’re doing in the world is entirely related to the comparison group we’re using. It has nothing to do with actually how much money we have, which is just really interesting. And it helps explain why people who are in war-torn poverty laden countries can be happier than the average American because for them, they’re in a small group, sort of a tribal group, and we all have tribes too. This is sort of our brain in the modern world that is really the prehistoric cave person brain we all have. And this is how we’re operating around money. So, you compare yourself to the people around you and if you feel like you’re doing as well or about as well, you’re fine psychologically.
Dr. Klontz: 13:48 If you feel like everyone else is doing better than you, it creates a sense of panic, a very deep primal sense of panic that things aren’t okay and actually your survival’s at risk. And so I think that drives a lot of that anxiety. And of course, social media just makes it so much worse. Like in terms of what’s being put forth as like look at all this stuff people have that’s better than you and look at this incredibly happy family. Doesn’t that couple look like they’re really in love. I’m looking at my wife, I don’t feel quite as much in love right now with her as they seem to be. So we’re inundated with all this stuff that sort of tells you that things aren’t okay and other people are doing better than you, which really creates, and is a driver for a lot of that stress and anxiety.
Jen: 14:29 Yeah. And I’m also thinking about how these events that can seem completely insignificant maybe to the parent at the time can really form the basis of something that seems much bigger to the child. And thinking about an incident from my childhood, I think I was probably between about age six and eight and I was up in my bedroom one day, I was cold, I turned the heating up. Our heaters will always set on number two out of six. So it was set on number two. I turned it up to the top setting of 6. But the thing is in England we are on central heating, and it actually takes a long time to warm up. And it wasn’t until later in the evening that my mom and I came into my room to go to bed and we both suddenly realized it’s really warm in here. And when she saw the radiator was set on number 6, she was so mad at me.
Jen: 15:10 And she made me go and tell my dad what I had done. And I don’t remember being punished for it, but I so clearly remember the shame and I clearly remember the message that we do not waste. And that has become an absolutely defining money script for me. And I try and make sure that my daughter doesn’t waste water and food and stuff like that. But I also try not to shame her about it when it does happen. And so I’m wondering is there a way to know whether I’m passing on sort of, I don’t know if good is the right word, but productive or useful money scripts, healthy messages about wasting and about money or how to tell if, you know, when we’re parents and we’re in these moments if we’ve overstepped the line.
Dr. Klontz: 15:47 Yeah. So, wow, just a profound example that you just gave me and those are the defining moments for many of us in terms of our relations with money.
Jen: 15:56 Yeah. And did it seem defining to my parents?
Dr. Klontz: 15:59 Probably not at all.
Jen: 16:00 I highly doubt it.
Dr. Klontz: 16:02 And they have probably a whole paragraph in their head or a whole chapter related to what they’re trying to pass down to you. But as parents, very often we’re not even aware that we’re giving the message. And for me, I’ll give you an example, I just moved as we were talking about before the show, I moved from Hawaii to Colorado and I have a 6-year-old son and I’m an expert in this area, so I make no mistakes with my children.
Jen: 16:25 Of course not.
Dr. Klontz: 16:26 But when he said, “I wish I had 1 million dollars daddy.” And I gotta tell you, I was like, oh wow, this is cool. My son wants to talk about money. And I said, well, what would you do with 1 million dollars? And he goes “Well, I would pay the movers so they could move our stuff.” And I was going, wow.
Dr. Klontz: 16:42 And then I realized, oh my goodness, he overheard me and my wife talking about which moving company to go with. And we were pricing it out and all that. And he got the message that he needed to chip in and help. And first of all, that was kind of alarming because he actually didn’t need to chip in and help. And obviously I was passing on some of my frugality or whatever it is, some of that energy around that and he’s walking away with a message that we don’t have enough money to do what we need to do. And so I think that ideally, and that’s one example of something that I caught and I probably have missed a hundred of them, but those are the sort of opportunities where I sort of sat down and I gave him the paragraph.
Dr. Klontz: 17:18 And so I said, well, actually, you know, buddy, you don’t need to do that. I mean, I would want you to use that for yourself. Mommy and daddy, we’re doing this though. We were trying to find out which mover and we were doing the pricing and so basically I decided to teach him kind of what we were doing with the comparison shopping because kids are gonna walk away just like you did with this message around money. And so it’s always an opportunity I think for you to expand it so that it becomes more balanced and less sort of rigid or that one sentence. One sentence is always the most dangerous thing in terms of money. Like rich people are greedy, for example. That is a very common belief and there’s no lack of data to support that there are some very rich, greedy people out there, but it’s only part of the story, right? It’s actually more accurate to say some rich people are greedy and some do incredible things for the world and humanity with their money. Like that’s a more balanced, accurate sort of belief. And so I think it’s the challenge for me as a parent, I think the challenge for parents, your kids are getting messages about money from you frequently and if you don’t have some explicit conversations with them, they might walk away with a total misunderstanding around what you want to teach them.
Jen: 18:26 Yeah. So it’s almost, I’m thinking I often come back to this episode where we talked with a sex educator about how to talk with children about sex and her thought was it’s not a one-time conversation that happens when your child’s seven or eight. It’s an ongoing much less threatening series of conversations that sort of answer your child’s questions as they arise rather than it being this big thing that one day we’re going to talk about.
Dr. Klontz: 18:50 Okay, I’m going to go back and listen to that episode.
Jen: 18:52 It was a good one. It was definitely a good one. And so I just want to sort of detour a little bit into a methodological point. I know that you had developed the money script inventory by serving 422 people and 82% of those were white and 48% had a net worth over a quarter million dollars and 62% of them said that they had grown up in middle, upper middle or wealthy households. And so you had noted in the paper where you described this work that this sample is actually pretty similar to many of the characteristics of households that use financial planning services, which is probably quite different from the characteristics of the broader US population. And so I’m wondering, you’ve mentioned that you’ve done this work with thousands of people now. Can you tell us about what evidence you have that these money scripts are also applicable to those of us who don’t use financial planners?
Dr. Klontz: 19:40 Yes, absolutely. And that’s a really good point. And I think it’s really important anytime you’re looking at research to really look at the sample like so who exactly are you researching? Because it totally biases the results and where you can generalize it. So, we’ve gone ahead and done many more samples over time and across all the samples what we have found is that people who really strongly endorse these like money avoidance, money status, money worship beliefs, it’s associated with less income and sort of terrible financial outcomes. So we’re pretty confident around that. And when there’s a lot of what we would call face validity to it too, because if you look at the items, it’ll make sense. You’ll be like, oh yeah, I get why that wouldn’t be so good for your financial health. So yeah, so we’ve been able to, you know, frankly make it more valid the more times we’ve been able to give it to a wider range of samples.
Jen: 20:29 Okay. All right, great. Thanks for clarifying that. And so moving on to money disorders. In your book you described 12 of these and they’re in three major categories and unfortunately we don’t have time to go into all of them. So I’m just going to list out the ones that are in two of the categories so our listeners are aware of them. And then we’ll go more deeply into the one in the third category. So in the first category is money avoidance disorder and there are four items in there which are financial denial, financial rejection, underspending and excessive risk aversion. And then in the money worshiping disorders category, there are four of those which are hoarding, unreasonable risk-taking/pathological gambling, workaholism and overspending/compulsive buying disorder. And so each of those can take a toll on our families. But I really want to focus on the four relational money disorders ‘cause I think these have the clearest impact on our families and obviously that’s our focus here. And so the four of these are financial infidelity, financial incest, which is a very strong term. We’re going to talk through that a little bit. Financial enabling and financial dependency. So I’m wondering if we can talk through some of the features of those disorders and perhaps the commonalities that cut across them.
Dr. Klontz: 21:36 Sure. So financial infidelity is essentially where we are lying to our significant other around money. And it can be a lie, an overt lie or sort of like a liable mission. And it can range the gamut too like in terms of, you know, you made an investment and you’re purposely keeping that from your partner because you know that they would disagree with that decision or you’re accepting money from a family member and you’re not telling the other person around it. It’s intentional deceit. A lot of people aren’t very conscious of doing it. But in surveys about one out of three Americans admit to lying to their partner around money. And what’s interesting too is surveys show that about one out of three Americans admit to the lying to themselves around money too. So it might be the same folks, but it’s pretty common and unfortunately when it becomes revealed, it can really sort of shatter the foundation of trust in a relationship. And I’ve definitely seen it lead to, you know, relationships that ends or have a lot of trouble recovering from because people just feel betrayed. Like you’ve been living a lie in that kind of thing. Now, some couples, I will say sort of have this agreement that, you know, you have your money, I have my money, we don’t need to talk about it. And that’s not what I’m talking about. I’m talking about when one partner believes that there’s open communication and then realizes there isn’t. So that’s essentially what financial infidelity is about.
Jen: 23:04 Okay. And then financial incest is probably needs some definition.
Dr. Klontz: 23:09 Yeah, yeah, sure. So basically, and I’ve definitely seen this and it’s actually terrible when it happens because it has a devastating effect on a child’s relationship with money. But this is essentially where an adult is using a child to meet their needs around money. And it can happen in many different forms. One of them is where an adult is basically sharing too much financial information with a child. So much so that, you know, the child now has an anxiety disorder. Like I almost did to my son and luckily I was able clarify it, but basically where you’re using a child to sort of unload your stress or you’re having a child answer calls from creditors or you’re having a child basically sharing them too much information about like a divorce situation or a breakup. It’s like you can have braces but your dad won’t pay for them, that kind of thing. Or using them as messenger. So it’s any sort of violation of that adult-child boundary for the gratification of the needs of the parent around money.
Jen: 24:14 Got it. Okay. And then financial enabling.
Dr. Klontz: 24:17 So financial enabling and financial dependence go hand in hand. And this is something that I’m actively working and totally conscious of not wanting to do to my children because it’s so easy to do. Because as I mentioned where I grew up, there’s a part of me that’s driving me that I want to give my kids a different experience than I had. I want to give them opportunities I didn’t have. And so the mistake that I’m vulnerable to making is financially enabling them, which is essentially financial help that hurts. You’ll see this a lot where adults have been sort of swooping in and solving financial problems for kids and basically giving children the message that yeah, you don’t need to worry about money, I’ll take care of it. And which of course as a parent you want them to have that message, but eventually you need to wean them from that.
Dr. Klontz: 25:02 Because the downside is the financial dependent person who’s in their 30s, 40s isn’t working is sort of on the parental doll which becomes a really destructive psychological experience for them. So the studies we’ve done, people who are dependent on non-work sources of income, and this is sort of like expands the gamut here between like you see it in multigenerational welfare families and multigenerational trust fund families. So if you can think about it on the two extremes where you see this psychological approach to life where they lack drive, they lack ambition, they lack creativity, they very often will lack a sense of meaning and purpose. So it’s devastating in that regard. And then they also resent the source of the income. So you’ll see a lot of resentment, whether it’s towards government or towards the parents or the trust itself or the trustees. And so anyway, that’s financial enabling and financial dependence, which are very devastating.
Jen: 26:02 Yeah. And it’s obviously it has links to helicopter parenting and what we’re now calling, I think lawnmower parenting, where you’re not hovering overhead, you’re getting out in front and mowing down any potential obstacles. And it actually makes me think about something that one of my listeners, Megan wrote to me about when I put a call out to my listeners, what questions do you have about this topic? She wrote to me and she said that she’d known several people who never really got the hang of as she put it, adulting financially because family money was their backup plan and they used it pretty often. And sort of on the flip side of that, it seems as though other people have enough money but fall into traps with credit cards and other forms of debt and it eats up the money they have. And so it seems as though we are kind of walking this really fine line between not giving our children this sense that there isn’t enough money to go around, but still giving them some kind of sense of responsibility and trying not to make them feel paranoid about the whole thing. And I’m wondering if part of the answer here goes back to what Ron Lieber said about giving them control over small amounts of money and allowing them to fail. So they learn how to do this with really small amounts when they’re young rather than big amounts when they’re older. But I’m curious about your perspective on that.
Dr. Klontz: 27:07 Yeah, so I actually love Ron’s approach and in terms of structuring allowance too, because you know, one of the complaints I hear is like I give him or her the money and they blow it all. It’s like, well you know, you’ve got to have some strings attached ‘cause 7 year olds are going to blow it all. So using allowance as an opportunity and perhaps he mentioned this too, but like part of it you save, part of it you invest, part of it you spend, part of it we put it aside to give away. Just to sort of think about what are your values that you want to teach and using allowance as an opportunity to teach that. And of course the other thing when he talks about failure to actually experience a sense of lack every now and then like by lack, I mean there’s something I want but I can’t have it right now and I need to do some things in order to get it. I mean I think that’s all of us as parents, if we sit back and think about it, I mean we really want our kids to grow up realizing that we can’t have everything but you can if you work towards it, if you really want it and you put your mind towards it. So to give them those types of experiences I think is a really good idea to sit back and think about it. But it does require some thought versus just giving an allowance and crossing your fingers.
Jen: 28:13 Yeah. And I’m just sort of thinking through as we’re talking here, I was just finished last night reading a book by Dr. Alison Pew and she was talking a lot about how sort of consumer culture and its interactions with children and she talks specifically about allowances and how middle class parents kind of use an allowance as a way of removing themselves from the decision making process about what to buy. And I recognize myself immediately in this because that was why we set up an allowance. Because I got sick of being nagged to buy stuff. And so if I make this small pool of money available then I kind of removed myself as the gatekeeper. I’m still maintaining some control over it because I still have control over the amount of money that my daughter has. But I am kind of putting her in that position where she’s the person who gets to say in the moment am I going to buy this thing? And just wanted to kind of recognize that it’s a very middle-class thing to do and the people who are not so fortunate to have a regular stream of money to make available to their children don’t have this luxury and that they don’t have the ability to say I’m going to give you $2 every week ‘cause there might not be $2 left over from the grocery bill that week. I don’t know if you have any thoughts about that ‘cause I was just kind of, you know, thinking ad hoc here.
Dr. Klontz: 29:26 Yeah. So you know, I think that the allowance might be lower, which I think is okay. And so I actually do, I would sort of argue a little bit just growing up in that environment myself there I got an allowance. It wasn’t much, but I did learn a lot from it. And I think one of the mistakes that people from lower socioeconomic status will make comes back to that sort of shame experience that you described where it’s this belief that because I’m not where I want to be financially, I probably shouldn’t be, I’m sort of avoiding it myself, so I don’t want to teach my kids. And then the point I put out there is like, you know, you may be struggling right now, you may have credit card debt, but it’s still okay to teach your kids not to have credit card debt.
Dr. Klontz: 30:05 As a matter of fact, it’s important. And as they get older you can share more and more about what’s happening and what happened to you and the lessons you learned. I wouldn’t do that with really young kids ‘cause we don’t want to transfer that anxiety to them. But I would encourage people to sort of push past that. Like, look, most people aren’t exactly where they want to be around money. I’m not, I’m an expert in this area. It’s evolving from me and it always will be. But don’t take that sense of I’m not where I want to be and I’m not doing exactly what I know I should be doing. And sort of write yourself off as the most influential teacher in your child’s life around money because you are.
Jen: 30:41 Yeah. And also that actually reminds me of something I heard on national public radio a while ago, and I can’t remember for the life of me who said it, but it was somebody who said, you know, do I really want a wealthy person who’s, not to put financial planners down, but who is a financial planner to teach me about money? Or do I want a single mother who is living from paycheck to paycheck and somehow makes the groceries work and keeps the utilities on somehow even if she might not have enough money every month to do it, you know, that’s the person I want to teach me how to manage money. So I think it’s about recognizing the skills that you have and acknowledging them as skills as well, and seeing those.
Dr. Klontz: 31:17 I would agree and I would sort of just suggest that I think there’s a lot we could learn from both of those people.
Jen: 31:22 Yeah, yeah, okay, fair.
Dr. Klontz: 31:25 Yeah. Other thing I wanted to say about money is, and this is of course a psychologist, but money is a very powerful reinforcer and so you have to think about it like that. It’s almost like giving your kid a piece of candy. So whatever you associate with money gets reinforced. So if I give somebody money with no strings attached, then they’re just going to sort of assume that I don’t need to do anything and I get money. If I give money, you know, once there’s a behavior I like to see that kind of thing, then it reinforces the behavior. So just thinking of it in terms of a reinforcer, especially as kids get older and get into young adulthood, that’s where I think it becomes kind of dangerous if, you know, all I have to do is ask and then my parents will swoop in and save the day. Well, I’m not very motivated then to do the other things I would need to do to get money myself. Because if I had to do that, those behaviors would get reinforced, like going to a job, that kind of thing.
Jen: 32:13 Yeah. Okay. All right. So we’ve talked a lot about money disorders, on the flip side, what does financial wellness look like? How do we know if we’re doing okay related to money?
Dr. Klontz: 32:22 I have no idea.
Dr. Klontz: 32:26 So it’s sort of the flip side. So it’s people who report, you know, higher financial satisfaction. And again, like I don’t see this as a destination. Like the key is that you’re moving in the direction you need to go because that what helps us feel like we’re getting ahead and we’re doing the right thing. So it’s having low debt, you know, and there’s good debt and bad debt. Well, I should say there’s better debt and worst debt. You know, like many people need to borrow to go to school. I certainly did. Some people need to borrow for a home. Many people do. But you want to stay away from the kind of debt that will snowball in a real fast way. Like where you have high interest credit cards, that kind of thing, snowballing. So, it’s low amounts of that debt. Making sure that you’re covered on the downside. And by that I mean ideally having some fun set aside for an emergency. And which is a stressful thing for people when they don’t have it. So that’s something you can slowly build. And also making sure you have insurance, like whether it’s life insurance or disability insurance or just making sure that you’re adequately covered in the event of some catastrophe.
Jen: 33:29 Okay.
Dr. Klontz: 33:30 And also for me too, it’s feeling like you’re happy with your relationship around money and how you communicate with your family members around money. That’s an important element too.
Jen: 33:40 Yeah, for sure. And I think it goes to the idea that we think about money and the way where we think about money is being really rational. We think that when we make this decision, it’s a rational decision and it seems as though a lot of the times these decisions are more based on our emotions and our money scripts. And one of my listeners, Amanda wrote to me, she’s a financial planner and she was asking whether there are specific communication tools that she can use to help people discover and understand what’s best for them. And I think she’s thinking about it in terms of kind of an intervention. When she or another family member wants to talk with a person about how their financial decisions are potentially harming them, but she’s also wondering whether there’s work that a person needs to do on their own before they can accept help from other people.
Dr. Klontz: 34:21 Yeah. So this sort of brings to mind a study that we just published last month. And the question really is how do you get people to save more? So we put people in a couple of different groups and one group we taught them financial information like education. The other group I had them essentially create really exciting pictures of what they want out of life. We did a bunch of other stuff too, but sort of the end result was this vision board, if you will, of their top financial goals that are really based on their values and what matters most. And what we found is a 73% increase in savings just after having that experience because people got really passionate about what they’re doing it to begin with, why they’re doing it. And I think that’s, if there was one piece of advice I could give to people, it would be sit down and really think about what you want financially.
Dr. Klontz: 35:10 And you know, maybe it’s an early retirement, college savings for your kids, a car, whatever it is, a house because these are really probably attached to what matters most to you, your core values. And if you can get a really exciting picture of what you want and when you want it and what it’s going to look like, then it becomes a lot easier to do some of the more mundane tasks of sort of like reducing your spending or whatever. But if you can get an idea of what you really want, it makes that really easy. If you start with this idea that, okay sweetheart, let’s have a meeting and we’re going to sit down and cut out all the joy in our life and we’ll just do that for 40 years and then we’ll be able to retire. So here, let’s…
Jen: 35:46 Sounds fun.
Dr. Klontz: 35:47 Yeah, let’s start with what you like and we’ll just cut out, you know, you don’t need to go to the gym, etc. That’s a miserable experience for people. Whereas if you, and most people haven’t actually sat down and thought, you know, what do we want our money to do for us? What matters most to us? And I think that’s a really exciting place to start.
Jen: 36:05 And actually even before you get to that point, I’m thinking about the exercise in your book called the Money Item, where you instruct readers on how to create, it’s kind of a complicated diagram to help you understand the unfinished business impacting your financial life. And one of the things I really liked about it actually is it doesn’t just look at you and your immediate family, but also looks beyond this to the cultural and historical events that really shaped you. And as I did the exercise, I was surprised about, again, how many things that came up that seemed tiny at the time, but that really had an impact on me. And so a couple of examples of that in my grandparents on my mother’s side were quite well off. And my grandfather would get a new company car every three years, it was given to him.
Jen: 36:44 They didn’t take them back at the end. At least a couple of times he sold us the old car cheaply. And that’s how we got our cars. And so I wondered for the first time, what was that experience like for my father to kind of rely on his wife’s father for getting new cars. And I’d never thought about that before. And then kind of further away from that, more distal to that, I was thinking about the coal miner’s strike and it was all over the news in the UK when I was about 6 and Margaret Thatcher had decided she wanted to break the power of the coal mining union. And I remember clearly on the news seeing pictures of people who did not have a lot of money protesting something and I didn’t fully understand what or why. And at the same time I was really glad that I wasn’t a grown up and had to worry about these things. And of course this is also a sign of my privilege that my dad had a job as a teacher and it didn’t require that he risk his life every day. And so I’m wondering what are some of the more common kinds of issues related to money that you see come up when people do this kind of exercise?
Dr. Klontz: 37:38 Yeah, I’m so glad you mentioned it because it really helps put things in perspective because you can give me the craziest money behavior ever that makes no sense. And you’re thinking, oh my gosh, this is so ridiculous. And if we can just sort of walk through the door of, okay, so where do these beliefs come from? And trace them back in history. It’s totally profound.
Jen: 37:59 Yeah. There’s a reason for it.
Dr. Klontz: 38:00 Yeah. There’s a total reason for it and I was sort of joking, there’s a reason for it and it’s your mother’s fault, but it’s probably not even her fault. It’s probably five or six generations. And sometimes we don’t even know these stories. And that’s what I realized. I was playing out this entire story. I didn’t even know what had happened when it was clearly passed down through the generations. And so tracing that, not just what you saw growing up and you experience, which is profound, but you were brought into the world with this certain mindset around money that comes directly from your ancestors and your culture, what it was like for you, your minority status and how that’s impacted you like for example, studies have been coming out too.
Dr. Klontz: 38:37 We’re still not doing a very good job of raising young girls to be empowered around money. It’s actually astoundingly tragic. It’s not something we’ve really addressed where we’re giving boys different experiences around, you know, hey, you gotta be on your own more. So they have more financial literacy, they feel more empowered financially than we’re sending young women into the world with. So that’s just an example of how your gender even will play out in this. But yeah, the more you can learn about your family history, the more your relationship money’s gonna make total sense. And then it’s empowering too, because the shame starts to melt away and you realize, I’m playing out this script that has been going back for generations and it’s impacted generations of my family. And that’s something I’m really passionate about is that family legacy that I have and sort of taking the mantle of, I’m going to start changing that family legacy. And it might take two or three generations to get where I would like to see our family get. But it’s something you can tell that I get passionate about and I encourage people to look at it in that longer sort of framework because it really helps diminish shame. It can help really sort of ignites your passion around what you want to do.
Jen: 39:43 Yeah. And so understanding where things came from, as you said, it helps to diminish shame and then the exercise around what are your values is what helps you to kind of tip the scales, right? And move in a different direction and the ongoing conversations with your children about money rather than having it being something that’s just kinda hidden away and we don’t talk about it is what is going to help you to achieve those goals and values.
Dr. Klontz: 40:04 Yes. I totally agree. Just putting those altogether really is an empowering experience.
Jen: 40:10 Yeah. And so you mentioned kind of intergenerational issues and that brings to mind intersectionality and the ideas around race and other, you mentioned gender as well and how these impact money scripts. And I’m thinking specifically about writing that you’ve done about the money scripts that people from nondominant cultures like African Americans and Japanese Americans can have. And so maybe you could start by telling us what some of those might be. And then what would you say to someone who recognizes these kinds of money scripts in their family history? Just help them work on overcoming them and creating more productive money scripts.
Dr. Klontz: 40:42 Yeah, I think it really helps to pay attention to this and be aware of it. And so there’s been studies done, you know, African-Americans compared to Hispanic Americans compared to Caucasian American. We all have, based on the cultural experiences, again, it can go back for generations. And the experience that people are having currently right now in the United States, for example, this have a direct relationship to your beliefs about wealth, about money, about what’s possible, not to mention obstacles. I mean these are very real obstacles that many people who have a minority status in one of these areas will experience. And so it’s not to be diminished at all. It’s a very real thing. And just being aware of that. And one of the things that I really like and one that’s actually isn’t really talked about a whole lot is his socioeconomic status too.
Dr. Klontz: 41:29 Like there’s a whole culture that sort of transcends race, for example, around socioeconomic status and believing what’s possible. And you know, for my family or me based on where I grew up and realizing that these are sort of clusters of beliefs and we’re surrounded, we typically surround ourselves with people who believe like us quite often look like us, share a similar religion, that kind of thing. And so these beliefs will be very much focused in that group. And I call it your socioeconomic tribe, if you will, or your financial comfort zone is the other way we talk about it. And that’s all great unless these beliefs aren’t serving you well. Like if you’re having a belief that for example, money corrupts or there’s virtue in living with less money, that belief is not going to serve you well frankly if your goal is to make more money.
Dr. Klontz: 42:16 And so very often if you’re looking to, for example, move in a certain direction with regard to socioeconomic status, you have to look at it almost like another culture. Like for example, if all of a sudden all my money was gone, I would need to learn the culture of how to survive in Boulder, Colorado with very little money. And there is a culture and a group of people here who know how to do that better than I do. So I’d have to learn like, okay, so what are the resources? What’s the mindset? What do I need to do this? Same thing if you want to move into an upper socioeconomic status. So, I like looking at it from that cultural framework and realizing if I want to move out of this particular group I’m in, then I need to learn how people think, how people might do things differently.
Dr. Klontz: 42:59 Like, for example, just as an example, like I grew up in my family, it’s like we were sort of you do it yourselfers, which becomes do-it-yourself-itis. And so it was really, really tough for me to hire a CPA to do my taxes. Like there’s this mindset like, no, you have to do it yourself. Are you kidding me? You’re gonna go pay a CPA money to do this? And so realizing that that is a lower socioeconomic status, very practically, you can’t afford it. That I had to sort of transcend as I started to move up the ladder because things got a little bit more complicated. Now I have a business and I don’t know how to do this. And so I always tell people like, look, I know you have a pair of pliers in the garage, but you might want to outsource your dentistry. You know? And I think that that’s sort of a middle-class trap in terms of that mindset. That’s a cultural thing where in our studies we find that people who are moving into those upper socioeconomic levels, they’re more inclined to actually, you know, pay a lawyer an hour for his or her time to help you set up a business or just considering reaching for those other sources of help as an example.
Jen: 43:58 Yeah. And I’m recognizing myself in that as you’re talking. I’m in an income level where a lot of our peers have people who come and clean their houses even if it’s just on a very infrequent basis. And I cannot bring myself to do that because I cannot bring myself to pay somebody to do something that I’m capable of doing for myself and feel like I should be doing for myself. So even though I recognize the amount of time that it would free up and they could potentially be a wise investment. So, I definitely recognize that in myself. And sort of continuing on from what you saying as well, I don’t want to make kind of white people as the middle class white people specifically as the thing that everybody should aspire to because I’m also thinking about what are the ways that the dominant culture impacts money scripts for people of all cultures and potentially in negative ways. And something that came to mind for me was making it unacceptable for us to express our intense emotions related to our experience with money and really come to terms with our previous experiences about money. So what are some of the ways that the dominant culture interacts with money can potentially harm ourselves and also other cultures?
Dr. Klontz: 45:04 Yeah, so you actually hit on something. As a psychologist too, I’ve done a lot of study in posttraumatic stress and one of the reasons that people have posttraumatic stress is because they have these sort of cultural inhibitions to expressing emotion and processing things, which is a total Western sort of affliction that a lot of other cultures aren’t afflicted with. It also makes you a little bit stuffy and boring, but so it profoundly affects things. And one of the things that you see and it can sort of get pathologized, although I don’t think it is at all. Again, that’s sort of like the continuum from independence to interdependence. And that’s something that you see, you know, when you do studies controlling for things like people, they’re making the same amount of money, they have the same amount of net worth.
Dr. Klontz: 45:47 They live in the exact same proximity to their parents, for example, you’ll find that African Americans as a culture are more incline to want to take care of their aging parents. And so just as an example of something that, you know, as I’m getting older, I really hope that my children will adopt that sort of philosophy, but just as an example of the degree to which you feel like you’re on your own and there’s nobody going to help you. The degree to which you have a community of people who you can count on to be supportive. So it’s just an example of something that, you know, I see in my parents where, you know, it’s like they don’t want me to feel like I need to take care of them at all, which I appreciate on the one hand. And on the other hand, it’s kind of sort of a lonely approach to life. Right? So I think that anyway, that’s the first thing that came to mind. And there’s a lot of research showing that those differences, Hispanic Americans also having that closer connection to family.
Jen: 46:41 Yeah. And sort of related to that, there’s a really big movement right now in parenting around minimalism among middle class white parents I should say, and having less stuff in our homes. And again, finishing Dr. Alison Pew’s book last night and I’ll put a link to the book and the references for people who are interested. She talks a lot about how the parents that she interviewed in her ethnography are really seeing this as kind of a way of saying to their children, well, having a lot of stuff is not good for you. But at the same time they’ll take their children on expensive holidays and well sort of put out markers of wealth in other ways. But I’ve also read that it’s really our privilege that’s allowing us to be this sort of, and I’m going to say “minimalist” because we are a minimalist where we choose to be minimalist.
Jen: 47:24 And so we’re getting rid of things that we don’t need because if we ever find that we do need it again, we can just replace it. But there are definitely people who don’t have a lot of money and don’t have this luxury. And if there’s a chance they’re going to need something again, then they need to save it. And so I’m just trying to think through, is there a way that we can think about money scripts that people from both of these groups might not be serving their children in the best way possible? And I don’t think it’s one is doing it right and the other’s doing it wrong, but what kind of shifts could either or both of those groups make to better support their children?
Dr. Klontz: 47:59 Well, first of all, I just want to bring to light that when it comes to money, we’re all a bunch of hypocrites.
Jen: 48:07 Right?
Dr. Klontz: 48:08 And we have a ton of internal conflict.
Jen: 48:11 Yes.
Dr. Klontz: 48:12 You know, I mentioned the money avoiders who believe rich people are greedy. Well, the studies we’ve done is if you really, really believe that rich people are greedy and money corrupts, you’re also very, very much more likely to believe that you wish you were rich yourself and you had more money and it would solve all your problems. So we’re very much conflicted and obviously, obviously like when you’re growing up, typically when you’re growing up with lower socioeconomic status, you’re not thinking about minimalism as this cool, trendy thing to sort of like show your friends your status, basically. Like how minimalist are you? You know, I’m more minimalist than you are. And really frankly, it becomes a status thing. And I’m not really going to bash status because that’s part of the human experience. And what’s so funny is the people are the biggest bashers of status, really find a lot of status and bashing status. So anyway, I feel like obviously my grandparents generation, they weren’t minimalists because it was this philosophy they endorse. They were actually really poor and they lived through the great depression and they were terrified about not having enough, which is why they had 60 partially used bars of soap under the safe.
Jen: 49:14 Yes, because you might need one of them.
Dr. Klontz: 49:15 Exactly. Exactly. So I mean the fact that this movement towards minimalism has a bit of luxury involved in it, totally makes sense. That doesn’t mean it’s a bad thing.
Jen: 49:25 Okay. And what about the flip side of that then? I mean, should we save all our 60 bars of soap?
Dr. Klontz: 49:32 You know, I just really love how it seems like as a culture we’re moving more towards thinking responsibly or just thinking about our impact. So I’m a huge fan of that and it’s great because I wasn’t raised in that culture, that wasn’t a gen X thing, although it should be. And so I find that, for example, my son is like, hey daddy, turn off the water when you’re not using it. And I just love it. I love that. I love that he’s being taught that and I’m learning that myself.
Jen: 50:00 Okay. All right. And so as we sort of wrap up here, I’m wondering if there are parents who are listening, thinking, wow, I really need more help with this or I think I might need more help with this and I’m not sure where to turn. And again, my financial planner listener was wondering what are some of the signs and symptoms and conditions that might lead a person to seek professional help with financial matters and I would imagine the first person to reach out would be a financial planner or advisor. But I know from your work that most of these people are really well versed in maximizing returns because they assume that that’s what their client wants. They want more money rather than really truly understanding the client’s actual needs and working to meet those. And also these financial planners tend to be people who use really rationally based arguments, which seems unlikely to be successful when a client has a serious money disorder. But from what I understand from your work, I think financial therapists are really pretty few and far between. So what would you advise for somebody who feels like maybe they need some help with this and aren’t quite sure where to go?
Dr. Klontz: 51:01 Yeah, so obviously I put out a lot of content. I’ve got a YouTube channel that’s available and then I was actually gonna suggest that people look up the Financial Therapy Association, but you’re right, there’s not as many people who are into that. Now I will say this, that there is a growing trend in the mental health profession to become more attuned to financial stress. At least I’m pushing really hard in that direction. And then on the flip side, there’s more and more financial planners are really understanding the impact of psychology and emotion and values on people’s relationship with money. And I see a positive movement in that direction also, and so there’s a lot, I’d say that the primary things available to our self-study, the other thing that I’d say in terms of therapists, by the way, we did a study on therapists and they have a tendency to be money avoidant. I would say that probably the exception though are people who are really doing a lot of marital therapy and couples therapy, I mean, again, money’s the biggest thing that couples fight about in the first few years of marriage, so they will probably have some experience at least in helping people negotiate solutions when it’s impacting their relationship. But I think at this point a lot of it is self-study.
Jen: 52:07 Yeah. Okay. So definitely I’ll check out your YouTube channel then, and I’ll put a link to that in the references too. And if it seems as though you need more help then maybe look to sort of couples therapy, marital therapy rather than financial therapy.
Dr. Klontz: 52:19 Yes. Well you could start by looking, you know, Financial Therapy Association. They’ll have a list of therapists and maybe you get lucky ones in your area.
Jen: 52:26 Yeah. Okay. All right. So I wonder if you could leave us with a nugget of wisdom that you would like our listeners to take away and think about their relationship with their money and how this will impact their children’s relationship with money.
Dr. Klontz: 52:40 I think I would go with a big lie, like don’t fall into believing the big lie about personal finance and just because I think it’s so destructive and that is that your financial problems are the results of you being lazy, crazy or stupid. No, no, no, no. If you’re stressed about money, look, you’re the average American, welcome to the club. And your beliefs around money and where they came from, that’s the trail you want to really walk down because all of a sudden it’ll make total sense and then it’ll give you a new perspective where you are then better able to sort of redefine and establish purposefully your relationship with money.
Jen: 53:16 That sounds like an awesome place to head towards or journey to be on. Thank you so much Dr. Klontz for taking the time to talk with us today.
Dr. Klontz: 53:23 My pleasure. Thanks for having me.
Jen: 53:24 And so all references for today’s episode along with Dr. Klontz’s YouTube channel and the books and studies that we’ve talked about can be found at YourParentingMojo.com/MindOverMoney.
Joo, S-H., & Grable, J. (2004). An exploratory framework of the determinants of financial satisfaction. Journal of Family and Economic Issues 25(1), 25-50.
Klontz, B.T., Zabek, F., Taylor, C.D., Bivens, A., Horwitz, E., Klontz, P.T., Tharp, D.T., & Lurz, M. (2019). The sentimental savings study: Using financial psychology to increase personal savings. Journal of Financial Planning 32(10), 44-55.
Klontz, B.T., Sullivan, P., Seay, M.C., & Canale, A. (2015). The wealthy: A financial psychological profile. Counseling Psychology Journal: Practice and Research 67(2), 127-143.
Klontz, B., & Klontz, T. (2009). Mind over money: Overcoming the money disorders that threaten our financial health. New York, NY: Broadway.
Klontz, B.T., & Britt, S.L. (2012). How clients’ money scripts predict their financial behaviors. Journal of Financial Planning 25(11), 33-43.
Klontz, B.T., Britt, S.L., & Archuleta, K.L. (2014). Financial therapy: Theory, research, and practice. Cham, Switzerland: Springer.
Shiv, B., & Fedorikhin, A. (1999). Heart and mind in conflict: The interplay of affect and cognition in consumer decision making. The Journal of Consumer Research 26(3), 278-292.
About the author, Jen
Jen Lumanlan (M.S., M.Ed.) hosts the Your Parenting Mojo podcast (www.YourParentingMojo.com), which examines scientific research related to child development through the lens of respectful parenting.