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The Surprising Way Your Siblings Affect Your Wallet


Can your position in the birth order of your siblings—or not having any siblings—influence your money management style and the decisions you make around finance? Numerous academic studies—stretching over several decades—provide support for a link between birth order and money-management skills. It may not be a perfect fit, but it is a statistical one.

Firstborn: The Responsible, "Adultiest" Child

The oldest sibling tends to hear a common refrain throughout childhood: "You're older—you should have known better." Responsibility for their actions and those of younger siblings comes with the title of "firstborn." It turns out that for many, being held to that standard, and the need to be a better risk manager as a result, is good practice for managing financial matters later in life.

Generally, the studies find that firstborns are less likely to let payment deadlines—any deadlines, really—fall by the wayside, making them good bill payers. A history of timely payments accounts for about 35 percent of a credit score. A better credit score leads to an easier time qualifying for the best rates on credit cards and mortgages. Paying less when borrowing can also mean a person has more money available for meeting long-term goals.

The studies conclude that firstborns may show some vulnerability when it comes to risk aversion. All those early years of having to do the responsible thing could keep them from taking financial and professional risks, which might moderate the overall level of success they achieve in life. The oldest child may find it useful to work with a financial advisor for risk management advice.

Holding the Middle Ground

Middle children tend to be their family's diplomats. They develop strong negotiation and problem-solving skills as they tend to ease relations between dominating older siblings and the antics of attention-grabbing younger siblings.

Perhaps in reaction to the intensity of their oldest sibling, middle children typically take a more relaxed approach to life and may develop a higher level of independence and self-assurance than their siblings do. Oddly, the studies find they also appear vulnerable to overspending, possibly as a result of having struggled to compete for attention. Middle children may want to take a look at some shortcuts to help save while they spend.

The Fun Ones

The youngest in most families seems to have all the fun, experiencing greater parental leniency, and less accountability than older siblings. This can make them endearing, fearless, and highly sociable. If they're consistently given a pass on responsibility and able to redirect blame for their actions onto others, it can undermine their finances later on in life. The results: late payments, a disregard for rules that can lead to lower credit ratings, higher fees, and less disciplined savings habits. The baby in the family might get the most benefit out of using a budgeting app like Mint to help with their finances.

Only Children

These individuals tend to track the characteristics of firstborns. They are viewed as organized, straight-talking overachievers who are used to having undivided attention and support from their parents. In general, they mature quickly and they've been found to have good credit scores. As a result of facing no competition within the family during their formative years, they also may have trouble with concepts like "losing" or "sharing" which could lead to overspending—on homes, cars and luxury items.

Out of Order

Regardless of where you fit into your family, your position in the birth order doesn't need to be a determining factor in the level of financial success you achieve. Instead, understanding the general underlying tendencies associated with your position may help you play to your strengths. Ultimately, you can take control of your finances regardless of your place in birth order.

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