Barnum was born in Bethel, Connecticut, the son of innkeeper, tailor, and store-keeper Philo Barnum (1778–1826) and his second wife Irene Taylor. His maternal grandfather Phineas Taylor was a Whig, legislator, landowner, justice of the peace, and lottery schemer who had a great influence on him.
Barnum had several businesses over the years, including a general store, a book auctioning trade, real estate speculation, and a statewide lottery network. He started a weekly newspaper in 1829 called The Herald of Freedom in Danbury, Connecticut. His editorials against the elders of local churches led to libel suits and a prosecution which resulted in imprisonment for two months, but he became a champion of the liberal movement upon his release. He sold his store in 1834.