The generation game: Why your cash-savvy kids will have wealthier grandchildren

The generation game:  Why your cash-savvy kids will have wealthier grandchildren
07 May 2013

Extracts from a recent conversation:

K: “My sister is exactly the opposite of me. She spends every penny she can lay her hands on! She's always been like that – even as a little girl. I saved, she spent.”

J: “My husband has three sisters who were always late getting ready, and so he would make his own sandwiches and walk to school. He's so self-sufficient. And he's great at managing money, but his sisters aren't.”

Nature vs nurture

And this brought up the inevitable million dollar question: how can people, who share the same gene-pool, who've had the same upbringing, be so very different, especially when it comes to how they deal with money?

But it also brought up something else: was the husband's behaviour the result of his nature? Or his nurture? Was he 'nurtured' into becoming self-sufficient because the circumstances allowed him, or perhaps forced him, to do so? Or was he just like that anyway.

In the genes?

Most would agree that our genetic makeup influences our behaviour. To what extent however, is where opinions differ. What we're exposed to also has a significant impact on how we conduct ourselves.

So let's look at this in terms of money-related behaviour - specifically: is it all in the genes and our upbringing? Is attempting to overcome 'who we are' a losing battle?

Well, it turns out that only 33% of our behaviour, when it comes to money, is affected by our DNA, this according to research by  Henrik Cronqvist and colleagues,  who studied genetic behaviour of investors and savers.

This is great news! It means that we every one of us - can change and modify how we react to things, so that our decisions are in tune with what's best for us, and not the result of what we've inherited. Whether we choose to learn from past mistakes, or invest the effort and energy in that journey of change is another matter.

Parental influence

And there's something else too: it turns out that 40 to 50% of a person’s behaviour when it comes to saving money is affected by parenting – up until the age of 20 to 25. The parental influence then peters off significantly – reaching zero by the time people are in their 40's.

This is what researchers say: “Parents do not have a lifelong non-genetic impact on their children's savings. The family environment when growing up, and an individual's socioeconomic status later in life moderate genetic effects, so that more supportive environments result in a stronger genetic expression of savings behaviour.”

There's one more thing I'd like to bring up this week too, namely that we can, and do, affect our children's lives in ways other than passing on our genes and the environment and experiences we expose them to.

Simple evolution?

We can literally change how our genes express themselves, and this has a profound impact on our offspring. Sounds mad doesn't it? After all, Darwin said that it takes generations to change our genes. But this isn't about altering genetic code; I'm talking about epigenetics – look it up.

Put simply, how genes 'work' is governed by cellular material — the epigenome — that sits on top of the genome, just outside it (hence the prefix epi-, which means above).

These epigenetic "marks" tell your genes to switch on or off, to dominate, or take a back seat. This is how environmental factors like diet, stress and prenatal nutrition can influence how a gene functions, and that form of expression is passed from one generation to the next.

Health and wealth

An example of this is that children of men who smoked when they were younger than 11 (pre-puberty – ie pre-sperm being formed) are prone to obesity and other health problems well into adulthood. It's very likely these boys will also have shorter life spans. Another example: the children of people who over-ate as youngsters are also prone to similar health problems. Do you see? What you do – even as a young person – affects your offspring. So how about using that for their benefit? Instill great money habits in yourself and in your children, for the betterment of not only all of you, but future members of your family. 

And so, it is really how we choose to live that determines who and what we become.

Experience and, most crucially, learning from mistakes is key to becoming better at handling money. This is why researchers in this financial 'nature vs nurture' space advocate that parents empower their children by allowing them to make their own financial decisions (and mistakes) early on, getting them onto that path of money experience/ financial awareness? as soon as possible.

So what are we up against? Sure we've got our parents, upbringing and environment to contend with a lot of the time. But guess what, they don't have a lifelong impact on your life.

Your DNA isn't your destiny, and the buck stops with you. Literally.

This article first appeared in The National

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