Generational Poverty: Addressing Financial Trauma From the Start

Financial trauma often starts at a young age by growing up in an impoverished setting, or even one riddled with generational poverty. There are more issues to that kind of poverty, other than what you can see physically. It can also manifest itself psychologically and emotionally. 

According to the Center of Progress, nearly 11 million children are poor in America. That’s 1 in 7 kids, who make up almost one-third of all people living in poverty in this country. 

Just hearing the numbers alone can be startling but what about the long-term effects of childhood poverty? United Way of the National Capital Area did a study and found that three primary effects of childhood poverty are linked to academic underachievement, behavior problems, and emotional and social issues.

Beyond Finance’s financial counseling and therapy experts believe that mindset is often passed down from generation to generation. People often talk about creating generational wealth but avoid discussing the hardships of being born into a cycle of poverty. 

Generational poverty can be a considerable burden for someone. Learning how to bridge the financial and mental wellness gap can take time. This kind of financial storm can’t correct itself in one setting. It will take time to correct it, recognize it, heal from it, and develop healthy coping mechanisms because of it. 

Let’s talk about some ways to overcome the vicious cycle that generational poverty can create. We enlisted the help of one of our financial therapists Dr. Kate Mielitz, Ph.D. AFC® for additional insight on three tips to help make lifestyle changes.

Mentorship

It is hard to think of ways to be different with your finances if you are the first person in your family to think about breaking the cycle of generational poverty. Consider getting a mentor. 

This person is someone who has been where you are. They can guide you in making the best decisions for your circumstances. Mentorship is a great way to enhance all areas of your life but also try looking into getting a financial advisor. 

Even if you don’t have an extensive portfolio, or feel like your income level doesn’t warrant an advisor, setting yourself up for success is the best thing you can do to start creating generational wealth. Perhaps start with a financial planner, counselor or therapist. The focus will be more on your spending habits and how to make your income work for you.

“A certified financial planner (CFP®) is someone you turn to when you want to focus on wealth management, monetary growth and looking and planning for the future. An accredited financial counselor will help you create and maintain or rebuild a strong financial foundation,” says Dr. Kate. “Financial counselors cover topics, such as budgeting or spending plans, using credit as a tool and navigating how to talk about developing savings strategies that work for your budget and goal setting.”

Invest in Yourself

Multiple streams of income have become a necessity for most. We all have hobbies or things that we are naturally good at that we tend to do for those close to us. I’m sure the compliment of “you’re so good at this- have you ever thought about making it a business” has come up a few times.

What’s stopping you from taking it seriously? Earning additional income can help pay back past debt, build a savings fund or help you invest in yourself.

Most importantly, research and ensure you have the time and resources to run your business correctly. Running your own business or becoming an entrepreneur is not a quick fix. It will take time to reach your goals. “The most important thing that you can do for yourself financially is find a balance. Suppose it’s something that you want to create and be entrepreneurial in that way. In that case, you must have the time to develop a good business plan, find resources or coaching on your business industry and understand the business process,” says Dr. Kate.

Education

While school is not the only way to be successful, it is undoubtedly a great starting point for those who may already be predisposed to poverty. Furthering your education and skills by pursuing a higher level of education is proven to increase your chances of higher wages.

“Do we find evidence that the college degree impacts future earnings? Yes. But that is because you provide physical evidence that you can stick to a program and grow, learn, and become more intelligent,” says Dr.Kate. “You can do that through trade school, online courses and even on-the-job training.”

According to the Association of Public & Land-Grant Universities, college graduates are half as likely to be unemployed as their peers who only have a high school degree. What if college is not a decision you want to make? What if you are struggling to find ways to finance the hefty bill? 

Remember, there are an unlimited number of trades you can become certified for that can provide you with the necessary skills to earn higher wages.