Canadians are financially stressed—is money trauma to blame?

Yet as difficult as these very real challenges are, they alone fail to fully explain why financial worry is running rampant. Could it actually be a symptom of a larger, more pervasive issue?

As a financial recovery expert and founder of The Trauma of Money, an online program that trains mental health and finance professionals in approaches to healing psychological traumas and creating financial safety, I see money trauma as the real problem. From my vantage point, our dominant economic culture can both cause trauma and activate previous trauma related to security and worth. 

Below, I unpack the top financial stressors Canadians are facing, help you understand how to recognize money trauma, and offer meaningful interventions to help you begin your healing journey.

Why are Canadians stressed about their finances?

Canadians are literally losing sleep over their finances with 1 in 2 (48%) reporting sleepless nights due to financial worries, according to the 2023 Financial Stress Index.

If that number seems high, consider that three out of four Canadians (75%) say they have financial worries of some sort, according to an Angus Reid Forum poll. The rate is even higher for Millennials based in British Columbia, where 90% report financial worries.

What is everyone so worried about? A lot, actually.

• Groceries, which have risen 5% to 7% in 2023, according to Canada’s Food Price Report.
• Gas, jumping 4.5% YOY, according to Statisitcs Canada.
• Interest rates, which rose 10 times from March 2022 to July 2023.
• Mortgages are expensive, with the policy interest rate sitting at 5%, the highest since April 2001.
• Home repairs and maintenance, with one-third of home owners (32%) completing emergency repairs due to weather-related events, reports HomeStars.
• Holiday expenses, specifically holiday travel and shopping, which increased 31% and 13% respectively in 2023, reports
  PWC.

All this financial stress is degrading our emotional and mental well-being. Financial hope is hitting new lows while financial shame is reaching all-time highs. The result? An influx of money trauma.

What is money trauma?

Money trauma, also called financial trauma, can be understood as a distressing event or series of events caused by financial circumstances, leading to ongoing challenges in one’s relationship with money and its management. Examples include an inability to retire, a loss of assets, divorce, poverty, being without income for three or more months, and economic abuse.

Still, it’s not the only type of trauma that can impact our money behaviours.

Really any trauma, even those unrelated to finances, can shape how you use money. Simply put, trauma is an emotional wound that impacts our self-worth and security.

Any negative experience around worth and security can challenge or influence money behaviours and habits, in addition to how safe we feel and how we feel about ourselves. 

In general, money trauma can stem from a variety of life experiences, including: 

• Generational trauma: Distress passed down genetically and/or through nurture. (For example, a grandparent growing up poor or during war could pass down feelings of not feeling secure with income.)
• Relational trauma: Situations like abuse, abandonment or neglect, which are typically experienced with caregivers or other close relationships. 
• Societal trauma: Threats and psychological harm targeted at a collective social group. (For instance, experiencing discomfort in managing personal finances as a woman due to patriarchal conditioning or enduring perpetual comparison to others driven by consumerism.)
• Systemic trauma: Institutional-level harm from broader systems like racism and capitalism. (This might manifest in various forms, like a strong aversion to debt stemming from societal trauma caused by redlining, predatory lending tactics aimed at marginalized groups, or other detrimental systems contributing to the racial wealth gap.)
• Scarcity mindset: The brain has a hard time differentiating between real scarcity and perceived scarcity, so experiencing either can impact the brain in a similar way to a trauma response. Real scarcity occurs when fundamental resources for survival are lacking. On the other hand, perceived scarcity may involve having our needs met but feeling as though we are lacking due to past experiences or comparing ourselves to others, perhaps through platforms like social media.

Financial trauma can impact the way we use money by impairing some of our cognitive functions. When in a trauma-activated state, we have less access to the areas of our brain that help us with long-term goal setting, decision making, rational thinking and impulse control. Responses to money trauma have shown that it temporarily disrupts speech or lowers IQ.

Although everyone’s experience of trauma is unique, the outcomes tend to manifest through a collection of similar symptoms: 

• Hypervigilance
• Hopelessness 
• Worthlessness
• Sleeplessness
• Numbness
• Flashbacks
• Memory loss 
• Irritability 
• Overwhelmingness
• Lack of concentration
• Chronic pain 
• Loss of sense of self 
  

When left unaddressed, trauma can lead to unhelpful money habits, such as compulsive spending, risk aversion, financial avoidance, and relational money disruptions such as financial infidelity. Trauma is often a catalyst for financial shame, too. Money trauma survivors may also experience shame for positive things, like getting a raise, buying a home or even getting support on a debt recovery journey.

A recent study by Coast Capital about financial shame demonstrates what that looks like in action: 63% of Canadians take some measure to avoid dealing with their finances, and 56% say financial shame is impacting their relationships with friends and peers.

With our most important relationships on the line, we can’t afford inaction. So what can we do? How do we deal with money trauma?

Healing and self-care interventions for money traumatized and financially stressed Canadians

If you suspect you’re experiencing money trauma, don’t suffer in silence. Financial shame that stems from unresolved trauma is a cycle, one that can be broken with honest conversation, genuine connection and thoughtful action.

Moving away from automatic trauma responses can take time, but doing so can be literally life-changing. In my Trauma of Money program, a six-step method to financial healing, the lessons focus on identifying and reimagining your money narratives. By combining nervous system work with visioning exercises, and redefining what wealth means to you based on your personal money values, we work to disempower narratives driving unhealthy financial habits. This is the depth of money trauma healing needed to move in a new direction.

Until healing happens, no amount of traditional financial planning or learning about money will help shift the needle on what really matters: true financial safety and well-being. 

At its core, recovery from financial trauma starts by decreasing your shame and increasing your discernment around money. To do that, you might consider: 

• Finding a supportive community. Acceptance and empathy are antidotes to the shame born from financial trauma. When you feel the urge to isolate youself and avoid dealing with money challenges, seek out communities of belonging instead. Judgement-free spaces like Debtors Anonymous can lead to transformative shifts in how we experience shame, particularly when we see others’ experiences reflected in our own. 
• Seeking help from a professional. You may want more specialized support. Need help building your financial goals? Consider working with a money coach. Experiencing symptoms of financial trauma? A mental health professional or financial therapist could help. (There are no regulations for financial therapists.) Want to work with a trauma-informed practitioner but aren’t sure where to look? Trauma of Money maintains a directory of professionals, from accountants and advisors to counsellors and consultants who are certified in the Trauma of Money method.
• Taking action. Finding your pathway to healing will be unique to you, but the key to moving in a new financial direction is in the movement. Making that next right step can make all the difference. Whether that’s contacting a credit repair company for information or downloading a budgeting template, you build your confidence around finances and positively reinforce your efforts every time you make financial decisions. 

Healing money trauma

Finally, it’s critical to remember that shame and trauma are intimately connected. Despite experiencing financial struggles on a national scale, we often internalize them as personal failings. In truth, many of these challenges are shared experiences, highlighted by the widespread affordability issues across the country. Whenever possible, put the onus where it belongs: a dominant economic culture built on scarcity—not you, as you’re reacting to what may be many years of money trauma.

Read more about the psychology around money:

• What are money scripts? What’s yours?
• What is the PERMA model? Can it help Canadians to spend better?
• Flow state vs. cash flow: Make better money decisions by discovering your flow state
• Investing Beyond the Numbers: Understanding financial flashpoints

About Chantel Chapman

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