Cartoon drawing of a family

Field Work

Birth Order Matters

Evidence, though scant, suggests that financial shortcomings may be related to birth order.

But there’s plenty of non-financial research indicating that the stereotypes linked to first-borns and “later-borns” are often on target.  First children who are best-positioned to relate to their parents often become high achievers (Abraham Lincoln or Warren G. Harding), while their attention-seeking youngest siblings tend to be more creative, social, or funny (Jay Leno or Stephen Colbert, who is the youngest of 11 children).

To get at financial behaviors linked specifically to each ranking in the birth order, a 2011 study found that later-borns tend to be the big risk takers.  And a February Bankrate.com article featured psychologists and financial advisers who said that they have observed clients’ money problems that they believe are linked to birth order.  Below are excerpts from the Bankrate.com article:

Responsible first born: “More often than not, being a perfectionist leads to burnout and giving up or setting unrealistic financial goals,” says Derrick Kinney, an Ameriprise financial adviser at Derrick Kinney & Associates in Arlington, Texas.  “That may sabotage your finances.”

Inventive middle child: “Being inventive can result in constantly moving debt around between different [credit] cards through cash advances and balance transfers,” said Chris Dlugozima, certified consumer credit counselor at GreenPath Debt Solutions in New York.

A secretive side muddies middle’s water, Dlugozima added, making them more likely to hide financial secrets such as unpaid bills and accounts from their spouses, thinking they can fix the problem themselves.

Socialite baby of the family: Los Angeles psychiatrist Dr. Soroya Bacchus said youngest tend to prioritize dinners out with friends, latte runs and trips to the mall over budgets. This leaves little or no money to pay bills. “They get into financial trouble because they can’t handle responsibility and may even believe someone will fix their financial problems if their parents have paid bills for them.”

In addition, a financial study published last April on birth order, “The Influence of Birth Order on Financial Risk Tolerance,” found that uber-responsible firstborns tend to be more conservative investors, putting 40 percent of their portfolios in stocks.  The authors, John Gilliam at Texas Tech University and Swarn Chatterjee at the University of Georgia, found that younger siblings, who can be loose cannons, put 60 percent into stocks.  Whether this would be a good or bad strategy, a financial planner would say, may depend on the clients’ time horizon: for example, a younger person has more time to ride market ups and downs, with the goal of coming out ahead.

Sibling rivalry can tear families apart over financial issues – and not just on television (i.e., “Dallas.”)  Frank Sulloway, who wrote the groundbreaking 1996 book on birth order, “Born to Rebel,” made a business of advising families on avoiding the dissolution of family businesses – or families – caught up in sibling power plays.

To read the Bankrate.com article, click here.

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