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Generational Lack in Finances Leaves Inadequate Preparedness for Life

Posted on November 8th, 2022
Generational Lack in Finances

Beliefs about money are instilled in all of us at an early age,” says Dr. Katherine Elder, Ph.D. a clinical psychologist and co-founder of Delaware Psychological Services. “These early messages shape our relationship with money.” Likewise, we hear and witness our parent’s response to money. And often internalize their beliefs and habits as our own, she adds.

“Beliefs range from needing to save every penny out of fear of not having more or a need to spend every penny because we do not typically have money,” Dr. Elder says. “When we want to improve our beliefs and therefore habits about money, we have to get to the root of our beliefs.”

Moreover, a generational lack of finances leaves inadequate preparedness for life.

An unhealthy relationship with food

Many health and developmental consequences are associated with intergenerational child poverty. Due to the financial difficulties of impoverished families, many children do not receive the nutrients they need to develop correctly. A study of other OECD and high-income nations revealed that low-income children in Spain and France (nations with a lower child poverty rate per capita than the United States, which suggests similar or worse results would likely be found in the US) consume less fruit, vegetables, or protein than non-poor children on a daily basis. Children living in low-income homes also have an increased risk of iron deficiency anemia.

There is also a link between child food insecurity, adult eating disorders, and obesity. For example, compared to their peers, low-income children are 21% more likely to be obese. Often, this is the result of unhealthy eating habits and food relationships, especially unhealthy food relationships.

It is common for children in chronic poverty to grow up in homes without adequate food. In turn, this has adverse physical, emotional, and behavioral effects. Often, these children don’t eat a balanced diet or get the proper nutrition intake. And they may even develop an eating disorder in adulthood.

Difficulties with cognitive and academic achievement

“Research substantiates the negative effects poverty can have on a child’s brain including development, learning, and academic performance,” write Ashlee Loughan, MEd, and Robert Perna, Ph.D. “Numerous studies have documented that low-income children, as young as age two, perform worse across cognitive measures.”

Using data from two national datasets, researchers found “that family poverty was significantly correlated with lower scores across cognitive and academic readiness in preschool-aged children (ages three to four).” Moreover, the result remained the same even after controlling for factors such as maternal education, family structure, ethnicity, birth weight, and gender.

“As children enter and progress through school, the kids living in poor families continue to perform worse on indices of school achievement,” the authors add. “Specifically, poor children were twice as likely to have repeated a grade, to have been expelled or suspended from school, or to have dropped out of high school.” A learning disability was also more prevalent among poor children in elementary or high school than among non-poor children by 1.4 times.

An insufficient level of social and emotional development

The stressors associated with poverty can also affect young children’s social-emotional development, increasing their risk for behavioral and emotional issues, states the Center for the Study of Social Policy.

  • In comparison with parents whose children do not experience poverty, parents of children experiencing poverty are twice as likely to report that their children are at risk for developmental delays.
  • Only 48 percent of parents of children living in deep poverty reported that their children were “thriving” developmentally, compared with 72 percent of parents of children not living in deep poverty.
  • Young children need a stable environment to flourish, and poverty makes it harder for caregivers to do so. In addition, stress and uncertainty in daily life and having limited resources to meet a child’s basic needs may negatively impact parents’ ability to parent successfully.

Children who are exposed to poverty in childhood – whether cyclical or chronic – are more likely to struggle to escape poverty in adulthood. Thereby perpetuating an intergenerational cycle. Children who experienced poverty at least half of their childhood are 37 percent less likely to be consistently employed than children who didn’t experience poverty at all or experienced it for a shorter period.

Poor psychological health

Researchers at Cornell University found that impoverished children were more likely to engage in antisocial behavior, such as aggressive behavior and bullying, and to feel helpless than their middle-income peers. Poor kids also have more chronic physiological stress and more deficits in short-term spatial memory.

“What this means is, if you’re born poor, you’re on a trajectory to have more of these kinds of psychological problems,” said Gary Evans, the author of the study and professor of environmental and developmental psychology at Cornell.

The reason? It’s all about stress.

“With poverty, you’re exposed to lots of stress. Everybody has stress, but low-income families, low-income children, have a lot more of it,” Evans said. “And the parents are also under a lot of stress. So for kids, there is a cumulative risk exposure.”

Growing up in poverty increases the chances of being impoverished as an adult. For example, 40 percent of sons will earn the same as their fathers.

“People walk around with this idea in their head that if you work hard, play by the rules, you can get ahead,” Evans said. “And that’s just a myth. It’s just not true.”

Digital divide

“Roughly a quarter of adults with household incomes below $30,000 a year (24%) say they don’t own a smartphone,” states the Pew Research Center. Most adults with lower incomes lack home broadband services (43%). They also lack a desktop or laptop computer (41%). American households with lower incomes are less likely to own tablets. Comparatively, each of these technologies is almost ubiquitous among adults in households earning $100,000 or more.

Why’s this important?

As a start, today’s students who develop tech skills are quietly gaining an advantage over those who don’t. Businesses operate differently now, from artificial intelligence to machine learning, and understanding technology helps children thrive in modern society.

Aside from supporting technological understanding, coding skills also develop coveted transferrable skills. It is more important to know what questions to ask in an age of access to information than to know what the right answer is. Children learn technology skills in a project-centric way that encourages them to break complex problems into manageable chunks. This skill is increasingly needed in high-skilled professions and at top universities.

Furthermore, they may not benefit from the secondary benefits of learning technology skills. Among these skills are problem-solving and logic. And the acquisition of new skills equips children with a development mindset, which improves their ability to learn.

Poor living conditions lead to future health issues

As a result of the decrease in rent prices in affordable housing areas, many impoverished families are forced to live there. Low-income housing areas are often situated in less desirable areas, have air pollution problems, and have structural health issues. Many lower-income areas contain asbestos, black mold, and lead — particularly in older homes.

In addition, people living below the poverty line are exposed to 20% more vanadium and 18% more carbon. It has been found that these elements are linked to cardiovascular and lung diseases.

The fact that some people cannot afford housing has caused them to become homeless is even more concerning. Even though children and families can end up homeless due to other circumstances, homelessness is more common among single-parent households and domestic abuse cases. Across America, 580,466 people were experiencing homelessness in January 2020. The vast majority were individuals (70 percent), followed by families with children (30 percent).

Homelessness, however, is associated with severe trauma for 90% of families, causing long-term mental instability for children. When a child lives in a poverty-stricken area and is homeless, their safety may be compromised.

Exposure to violence, incarceration, and victimization

Due to exposure in the community and the social capital (often negative) gang affiliation offers, adolescents growing up in low-income urban areas are at increased risk of joining a gang or becoming involved in gang violence. One study even found that 89% of low-income children had been in a gang at some point in their lives. Affiliation is seen by some as a way to achieve a higher socioeconomic status. While others, however, feel there is no other option to preserve their safety.

The mental consequences of being involved in gangs or just exposed to gang violence secondhand have been comparable to those experienced by child soldiers in other countries. In addition to these negative mental and emotional effects, there may be an increase in domestic violence and behavioral issues at school as a result.

Gang involvement is also associated with drug and alcohol abuse and school dropout. The chances of an adolescent dropping out of high school are 30% greater once they join a gang. The risk of students dropping out of high school is already significant among children living in poverty, and gang activity only adds to it.

Participating in gangs and dropping out of high school put these young people at a higher risk of being incarcerated or involved in juvenile justice. In low-income communities of color, mass incarceration is a significant obstacle to mobility and adversely affects low-income communities of color.

Not on equal footing.

A four-year college degree remains a solid financial investment, despite rising college costs and increasing student debt levels. On average, adults with a bachelor’s degree have better economic outcomes than those without. As a result, they tend to earn more money and accumulate more wealth, notes the Pew Research Center.

However, college graduates do not reap the same economic benefits. Using data from the Federal Reserve Board, Pew Research Center finds that first-generation college graduates are not on an equal footing with their peers with college educations.

Families with children who have a parent with a bachelor’s degree or higher have higher incomes and wealth than those whose first generation graduated from college.

College completion rates are higher among adults with college-educated parents than adults without. Approximately 70% of adults between 22 and 59 with at least one parent with a bachelor’s degree or more education have their own bachelor’s degree. Conversely, a bachelor’s degree is only held by 26% of their peers without college-educated parents.

Even if you’re lucky enough to attend college, many students will begin their professional careers burdened by financial anxiety and a mountain of student loan debt.

“Many of today’s college students are not ready to take charge of their financial lives because they do not know how or even what to consider,” said Ray Martinez, co-founder and president of EVERFI. “Financial literacy, like all important lessons, must start early – long before the student takes a seat at college orientation and certainly ahead of entering the workforce.”

You’re more likely to stay poor if you’re born poor

“What’s the number one reason people are in poverty? Birth,” said Mark Bergel, CEO and founder of A Wider Circle in Silver Spring, Md. It is a non-profit program dedicated to helping people rise out of poverty.

“By the time you are three years old in poverty, you have 30 million fewer words in your vocabulary than people in wealthier situations. You are already so behind that you don’t bother catching up,” said Bergel. This is the reality for over 12.7% of Americans, he said.

As a result of the lack of access to educational resources, poverty becomes a multigenerational cycle. As a result, children are ill-equipped for the future. That leads to the child remaining poor like their parents.

“We have trapped people in a system of poverty. We have blamed them for that, and we have pointed to the outliers of studies that say they don’t work,” said Dr. Georges Benjamin, the executive director of the American Public Health Association. “Trapping” occurs when people without financial knowledge lack the skills they need to succeed. If families don’t learn positive financial management methods, cycles will continue, and families will fail.

FAQS

1. What is generational poverty?

Families suffering from generational poverty have experienced poverty for at least two generations. As a result, many aspects of a person’s life can be affected by it: physical, social, emotional, and psychological.

2. How does poverty affect children?

Poverty impacts children in many ways, including hunger, illness, insecurity, and instability, but they also have low academic achievement, obesity, behavioral problems, and difficulties with social and emotional development. As a result of increased stress, poverty has a detrimental effect on developmental outcomes. A person’s cardiovascular system, immune system, neuroendocrine system, and cortical system can be adversely affected by stress, which may impair their ability to learn and make decisions.

3. What causes 70% of families to lose their wealth after the second generation?

The transmission of generational wealth is an aspect of financial planning aimed at passing on stable, significant financial resources to the next generation, says David Kleinhandler. But can wealth really be taught? Many business people, professors, financial planners, and others would be very wealthy if knowledge alone were enough. Unfortunately, to become wealthy, you need a lot more than knowledge. Many traits are challenging to teach and pass on, such as discipline, hard work, and sacrifice.

In order to achieve something better, the generation that earns the wealth must work hard and experience hardship. Achieving their goals requires diligent work and diligent saving. In time, their efforts pay off, and they can retire comfortably and pass on assets to their children. Their parents’ struggles demonstrate the importance of sacrifice and hard work to the next generation as they grow up. As adults, they may be more comfortable, but they remember the frugal aspects of their childhoods.

As a result of their awareness, they make better choices regarding education and finances, which enables them to build upon their parents’ foundation. Previous generations never realized the challenges and sacrifices they endured. Their only understanding of life is a life of plenty, and they do not understand what it takes to maintain their lifestyle.

In the second generation, 70% of wealthy families will lose all their wealth. And in the third, 90% will lose it. This can be attributed to a variety of reasons:

  • Money is not spoken about among generations
  • People of the previous generation fear laziness and entitlement in the next generation
  • Money is often misunderstood and misused by many

4. What is life amidst poverty like?

It is exhausting to live in poverty, explains Andrea Fuller. In the face of poverty, there is despair and desperation. “Poverty crushes the soul, dreams, and hopes of people. Poverty is like being enclosed in a prison cell with no doors or windows,” Fuller adds. “It feels claustrophobic, as if there is no way out.”

“Only the most resilient do not give up,” she continues. “Still, there is no guarantee that life will get better—and those in poverty know this all too well.” Either they become hardened, or they accept their fate.

“You don’t live life, you don’t thrive—you survive,” says Fuller. “You wonder if you are predestined, like a caste in another country, to live out a life destitute of fulfillment — whether financial, professional, or just having a better life.”

Deanna Ritchie

Deanna Ritchie

Deanna Ritchie is a financial editor at Due. She has a degree in English Literature. She has written 1000+ articles on getting out of debt and mastering your finances. She has edited over 40,000 articles in her life. She has a passion for helping writers inspire others through their words. Deanna has also been an editor at Entrepreneur Magazine and ReadWrite.

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