Financial-Trauma-a-Factor-in-the-Urban-Locale Financial Trauma a Factor in the Urban Locale
Written by DR SHAUN DANQUAH & PAUL ADDAE Aug 17, 2022

Categories: Blog, CR Blogs

“The worry, anxiety, depression and stress accompanying food insecurity can hinder a person’s ability to thrive.”



Financial trauma is an issue which in the current context of rising energy prices, cost of living crises and financial precarity, should not be underestimated. People who live with, or have grown up in, financial precarity and food insecurity often live in chaos and crisis. The worry, anxiety, depression and stress accompanying food insecurity can hinder a person’s ability to thrive.

Food insecurity, where people do not have enough food and worry about how they will eat, is also traumatic. Financial trauma is common among black and minority communities, and when people are traumatised, this can seriously impact how people handle and manage their money and finances.

This is a sensitive and key area which must be addressed in any initiative seeking to not only address financial literacy but, to also understand what may be underlying reasons for cases of financial mismanagement and the misappropriation of funding. This has been flagged within community organisations in the urban locale.

Background and Context

In a previous blog entry on rethinking governance, we discussed how a plethora of stories plague black community initiatives in the UK. We revealed how former impactful organisations collapsed into insignificance due to allegations of misappropriation of funds and mismanagement. We posited this was all indicative of poor governance capacity building in the first instance, however the second instance also needs to be addressed, that of financial trauma.

Many community groups comprise individuals who may have grown up in financial precarity and volatility, which leaves a deep imprint on how one will manage money in later life. Children, for instance, may imbibe the financial anxieties their parents experienced during times of hardship, and how one manages money in adulthood could be a reflection and emotional response to previous financial stressors.

It could be suggested that based on black communities, at all levels, experiencing trauma, stress and emotional strain, this also has to be afforded due attention when it comes to looking at financial management. Otherwise, we are asking people to manage their finances when they may not have adequately managed their own minds. Hence, this requires more than mere financial literacy training. Any initiative which looks to address financial literacy must also have a component which looks at financial trauma and addresses that from the root.

Financial Trauma

Trauma is the experience and subsequent repercussion of an extremely distressing event or series of events. Chen et al. (2022: 2) discuss that not everyone who experiences something traumatic will be traumatised, yet for many people, trauma may create a radical shift in how the mind and brain manage perception. Martin (2021: 60) notes that experiencing some form of trauma, whether physical, sexual or emotional, can make it hard to complete education or maintain a job which then leads to less financial stability and reduced food security.

Not having enough food is traumatic and when people are struggling with poverty and food insecurity, they are more likely to:

  • live in a place with environmental risks and hazards;
  • have inadequate access to transport;
  • suffer from physical abuse and domestic violence;
  • live in an area with a higher crime rate; and
  • be prone to making survival trade-off decisions on a monthly basis between paying for rent, food, utilities or medicine.

Klontz et al. (:59) note in their book The Psychology of Financial Planning:

Research has shown how such worldwide economic events have impacted individuals and the collective psychology and financial behaviours. The effects of financial crises are often first experienced through threats to emotional well-being. For example, foreclosures during the Great Recession in 2007 were found to be associated with increased rates of depression not just in the individuals who were losing their homes but, in the community overall, including higher rates of community depression and hospital visits.

Klontz et al. therefore suggest cultural financial events, such as that experienced in Greece from 2009-2018, can even lead to ‘mass traumatisation’, which in the current context of the cost of living crisis is quite concerning. Post-traumatic stress in the form of intrusive thoughts, sleep difficulties and emotional numbness were experienced during the Greek financial crisis, Klontz et al. highlighting:

…this experience corresponded with a mass movement from a buy-and-hold approach in favour of tactical asset management, as planners were left to question their approach to money management.

Trauma often manifests in traumatic stress reactions, described by researchers as “normal human survival [instincts]” developed in response to the traumatic event(s) that serve to protect from further harms. Trauma reactions can happen during or after the traumatic event — and can continue for months or years.

Family breakup for instance, can cause tremendous emotional and financial trauma, as can the death of the main family breadwinner (Lawinski, 2010: 85). General traumatic childhood experiences, unrelated to money directly, such as abuse or neglect, can also result in negative financial behaviours in adulthood.

Anxieties can lead to the complete denial of the reality of one’s financial circumstances and hence, can result in ignoring one’s fiduciary responsibilities in later life when in a position of accountability. This can lead to overspending, especially if there is a lack of financial literacy also involved. This often occurs where one was raised in low-income communities and did not have enough money to purchase nice things or treats. Yet, now the finances are available, it is not managed responsibly.

As anxiety leads to not adequately checking one’s finances, and it can also lead to overspending on family members and associates who also may have not had a lot of money during childhood.

Also, for many people who grew up in poverty, the trauma of this experience can lead to a scarcity mindset, which leads to a fear one will never have enough finances to survive. This can have several core repercussions for a person:

  • becoming a saver, where the person hoards and saves money, yet still lives a life of scarcity and anxiety around money;
  • becoming a hustler, where the person works hard in order to not fall back into poverty and chases a range of opportunities; and
  • learned helplessness, that causes people to think that no matter what they do, it does not matter.

This leads to a passive mentality, also known as an ‘external focus of control’, and is associated with self-destructive financial behaviours (Klontz et al., 2022: 52).

Talking about money is a taboo for many people and hence they do not like to talk about it so, people become isolated and keep the inner realities of their relationship with money to themselves in doing so concealing their financial troubles and concerns. This can lead to financial mismanagement and even misappropriation of funds. Some people, for instance, use disassociation, in order to avoid financial difficulties and shut them out.

Recommendations and Solutions

A cultural mediative-therapeutic supportive group approach bolted on to financial literacy training would be useful here which will emphasise:

  • the importance of putting community forward in terms of cultural nuances,
  • the significance of careful mediators, and
  • a trauma-informed approach to financial literacy.

The approach should be as follows:


Financial healing is required, before any training about financial literacy. This may involve frank and open discussion about one’s relationship(s) with money in a therapeutic and supportive manner as this can potentially reduce trauma. Centric holds it is pertinent to create safe spaces to facilitate such difficult conversations and to initiate dialogue around this under-the-radar facet, hereby also allowing communities to take ownership of narratives around trauma which particularly impact them.


Financial discussions must begin with a trauma-informed perspective, so when emotional instability is addressed, financial stability can be attained. The aspect of talking, though simple, can instill optimism, time, empathy and expression of any concerns. Plus, it allows the therapeutic sharing of experiences with people in a similar situation.


Psychology must converge with sound financial management to lead to financial behaviour change, hence holistic financial therapy.


People need to identify if they get tense when thinking about their finances. Then self-regulation is needed so people can make decisions in a calm and sober manner without being emotionally activated by fear, anger or extreme joy. So, a person should sleep on a decision and take time before taking effective action.


When necessary, one may need professional help in the form of therapy if one is often emotionally activated.


For some, complementary wellbeing therapies and activities may also help to reduce stress and emotionally driven decision making.


Impulse journals may be of use, where people write down whenever they feel the urge to make purchases and where they access if it is worth buying it now or, if it’s really needed.



  • Chen, J.X., McDonald, A., Zou, Y., Tseng, E., Roundy, K.A., Tamersoy, A., Schaub, F., Ristenpart, T., Dell, N. (2022). “Trauma-Informed Computing: Towards Safer Technology Experiences for All.” CHI ’22: Proceedings of the 2022 CHI Conference on Human Factors in Computing Systems. April 2022. Article no. 544, pp.1-20. Accessed Online July 2022: Trauma-Informed Computing: Towards Safer Technology Experiences for All (
  • Klontz, B., Chaffin, C.R. and Klontz, T. (2022). Psychology of Financial Planning: The Practitioner’s Guide to Money and Behavior. Hoboken, NJ: John Wiley & Sons.
  • Lawinski, T. (2010). Living on the Edge in Suburbia: From Welfare to Workfare. Nashville, Tennessee: Vanderbilt University Press.
  • Martin, K.S. (2021). Reinventing Food Banks and Pantries: New Tools to End Hunger. Washington D.C.: Island Press.
  • Williams, Q.M. (2021). “The Effects of Trauma and Chronic Stress on Black Women’s Reproductive and Sexual Health.” Vanessa P. Jackson, Jacqueline M. Holland and Julia R. Miller Arline (eds.), African Americans in the Human Sciences: Challenges and Opportunities. Lanham, Maryland: Lexington Books. 93-115.


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