Your relationship with money may play a huge role in how you handle financial decisions and your long-term security. Many factors affect your financial decisions, but you might be surprised by how much your childhood experiences still influence you today.

The majority of parents recognise how important financial education is. Indeed, according to Nationwide, almost 9 in 10 parents to children aged between 8 and 13 say personal finance education would help their children better understand the value of money. 59% also agreed that personal finances were more important than maths.

Yet, studies suggest these parents might be considering the positive effects of financial education too late.

Research: Money habits could be set by age 7

A 2013 study from Cambridge University indicated that financial habits are formed by the age of seven. The research suggests that children have often formed core behaviours by the age of seven which they will take into adulthood and could affect financial decisions for the rest of their lives.

While skills like being able to count money are important for handling day-to-day finances, the study recognised that other factors affected money relationships, such as the ability to regulate emotions and think reflectively.

Your approach to finances when you’re an adult might be just as much about your mindset as your financial knowledge.

For instance, you might understand the benefits of having an emergency fund of 3-6 months of regular expenditure as a safety net. However, letting emotions rule your financial decisions may lead you to overspending and not being able to create the fund that you need.

The Cambridge University research noted that once habits form, it can be difficult to reverse them later in life. However, it’s not impossible, so read on to find out more.

4 practical ways to overcome potentially harmful money habits

1. Understand your money habits
If you want to improve your relationship with money, a good place to start might be to take some time to understand your habits.

When it comes to your finances, are you more likely to base your decisions on facts or emotions? If you received an unexpected lump sum, would you splurge it or use it to support long-term goals?

Retrospectively examining your financial decisions could help you identify patterns in your behaviour. You might realise that while you’re good at managing your day-to-day budget, emotions are more likely to have an effect when you’re handling long-term decisions.

By understanding potentially harmful money habits, you’re in a better position to recognise when they could have an effect in the future.

2. Review your finances regularly
Busy lives can make keeping on top of your finances difficult. Yet, carving out time to regularly review your short- and long-term finances could also help you spot where money habits are harming your ability to reach your goals.

Seeing the effect money habits may be having on your finances may be useful when you’re trying to change your mindset. For example, if you’re often tempted to dip into your savings to cover non-essential expenses, seeing how it could affect your capacity to retire early, support loved ones, or overcome a financial shock could give you pause next time.

3. Give yourself time when you’re making financial decisions
Sometimes poor money decisions stem from not giving yourself enough time to think through your options or the long-term implications. So, next time you’re making a decision that could affect your financial future, don’t decide right away.

Allowing yourself a few days to think it through could mean emotions or other factors that were influencing your decision have subsided. It could help break negative money habits and start to form new ones.

4. Work with a financial coach
Working with a financial coach can help you to identify habits and beliefs that may not be serving you well.

Your financial coach can then work with you to rewire those beliefs and attitudes, so that you can build healthier financial habits for your future.

In addition, discussing your options can be a useful way to process information and look at your options from a different perspective. It could lead to you making decisions that have a better long-term outcome.

Drop me a line if you’re ready to get started.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.