by Dave Ramsey
Smart Money
Smart Kids
Raising the Next Generation
to Win with Money
“Train up a child . . .”
PROVERBS 22:6
© 2014 Lampo Licensing, LLC
Published by Lampo Press, The Lampo Group, Inc.
Brentwood, Tennessee 37027
All rights reserved. No portion of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means—electronic, mechanical, photocopy, recording, scanning, or other—except for brief quotations in critical reviews or articles, without the prior written permission of the publisher.
The Dave Ramsey Show, Total Money Makeover, Financial Peace, Financial Peace University, and Dave Ramsey are all registered trademarks of Lampo Licensing, LLC. All rights reserved.
This publication is designed to provide accurate and authoritative information with regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering financial, accounting or other professional advice. If financial advice or other expert assistance is required, the services of a competent professional should be sought.
Scripture quotations marked “NKJV” are taken from the New King James Version®. Copyright © 1982 by Thomas Nelson, Inc. Used by permission. All rights reserved.
Scripture quotations marked “NIV” are taken from the Holy Bible, New International Version®, NIV®. Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.™ Used by permission of Zondervan. All rights reserved worldwide.
Editors: Ken Abraham, Allen Harris, Jennifer Gingerich, Darcie Clemen
Cover design: Melissa McKenney
Interior design: Mandi Cofer
Cover photo credit: Parker Young
Library of Congress Cataloging-in-Publication Data
Ramsey, Dave.
Smart money smart kids : raising the next generation to win with money
/ Dave Ramsey, Rachel Cruze.
pages cm
ISBN 978-1-937077-65-5 (Kindle)
1. Children—Finance, Personal. 2. Finance, Personal. I. Cruze,
Rachel. II. Title.
HG179.R31562 2014
332.0240083—dc23
2014001650
Dedication
From Dave:
To the Ramsey kids, Denise, Rachel, and Daniel. You were the proving ground for everything written in this book. You showed us what worked—and what didn’t. You guys are the change in our family tree.
To our first grandchild, William, and all your future brothers, sisters, and cousins. You are our legacy.
From Rachel:
To Mom and Dad, who not only taught me how to handle money, but also how to live a full life through hard work, perseverance, integrity, and a relationship with Jesus. Thank you for the example you’ve been to the Ramsey kids.
To Winston, my husband, my encourager, and my support. Thank you for cheering me on every step of the way. I am honored to be your wife and excited to pass this legacy down through our own family.
Acknowledgments
This book is more than twenty years in the making, and there’s no way to capture every family member, friend, and team member who contributed to this endeavor in some way. So to all those whose names are too many to mention, thank you for helping us change our family tree and, in the process, launch a crusade to change an entire generation.
Special thanks to those who were hands-on in making this book possible:
Sharon Ramsey, Proverbs 31 wife and mother whose children rise up and call her blessed.
Winston Cruze, for your endless encouragement and support throughout this project.
Allen Harris and Jen Gingerich, a huge help with the writing and refining process.
Ken Abraham, a brilliant book editor and great friend.
Preston Cannon, for coordinating this entire project.
Darcie Clemen, Ashley Edmonds, and Brandon Brison, for providing outstanding editorial, research, and project management support.
Brian Williams, Luke LeFevre, and Melissa McKenney, our creative geniuses responsible for overseeing all design elements and cover art.
Jen Sievertsen and Beth Tallent, the best marketing and publicity minds in the business.
Suzanne Simms, Jeremy Breland, Joel Rakes, Meg Grunke, Neal Webb, and too many others to mention for their time, leadership, prayers, and hard work throughout this process.
Contents
Dedication
Acknowledgments
Contents
Introduction
I Was That Little Girl . . .
Work
Spend
Save
Give
Budgeting
Debt
College
Contentment
Family
Generational Handoff
I Was That Dad . . .
Notes
Endorsements
Introduction
DAVE: The first group I ever spoke to about how to handle money was a Rotary Club with forty-three people in the audience. I used an overhead projector, and I actually had hair. That was a long time ago, many air miles ago, and several million people in audiences ago. When I finished my big presentation that I had practiced for hours in front of the mirror, I walked to a table in the back of the room to sell copies of my little self-published book, Financial Peace, for twelve dollars each.
After I covered the basics of money (which is what I still do), everyone at the seminar agreed that common sense is not really all that common. I’m sure as that first person—a middle-aged woman—walked up to the book table, she saw a young speaker relieved that his big speech was finished. I will never forget her comment. Holding my little book, she looked at me and said, “Dave, that was great information. Why don’t parents teach their children about money? Why don’t we teach basic money skills like this in schools? Our kids need to know this information.”
She was right. This mom knew she had never been taught how money works, and she felt inept. She knew she could learn and work toward a better understanding of money, but she also had a sense of sadness knowing that she had not taught her children about money. Nor had anyone else.
For the last several decades as I have done media, spoken to millions in audiences, and traveled America, that scene and those questions have been repeated thousands of times—“Why don’t we teach our children common-sense money principles?”
Virtually all of us teach our children about things in which we feel competent. I have a friend whose dad is an excellent mechanic. That guy spent hours talking cars, laying under them or leaning over them. The dad and son built engines, played with gears, and did brake repairs every weekend and most evenings. And when they weren’t working on something mechanical together, they were talking about it. Is it any wonder that my friend is a serious gearhead? He loves anything with a motor, and he is great at it. It is a family tradition.
I have another friend whose father was a two-term governor of our state and was the youngest governor in our state’s history. So my buddy was a little boy living in the Governor’s Mansion. That family spent most of their energy, time, and dinner conversations on politics or public service. He literally cut his teeth on politics. Just by being present, he was taught by osmosis. Is it any wonder that he loves politics, became a U.S. congressman, ran for mayor, and served in multiple high-ranking public service offices? He loves anything having to do with public service. It is a family tradition.
I have another f
riend whose mother is a well-known author. . . . You finish the story. I have another friend whose father was always starting businesses, making them successful, then selling them. . . . You finish the story. I have another friend whose father loves aircraft, piloting, and aircraft history. . . . You finish the story.
We all have a family tradition. Sometimes it is a sad legacy, one that you work not to repeat. Children are sponges—they are going to absorb whatever is around them, so we need to be intentional about what surrounds them. The good news is you can choose your family tradition for the next generation. It is a choice.
People with wealth—who also have a healthy understanding of wealth—don’t obsess about money or worship money. They are, however, intentional about how it is handled, and they make sure their children know how to handle money. It is a family tradition.
When my wife, Sharon, and I went broke, lost everything, and filed for bankruptcy, we were two twenty-eight-year-olds with a toddler and a brand-new baby. I did stupid things with money, which wrecked that portion of my life. When I discovered common-sense, biblically based financial principles and applied them, our lives started turning around and we began to win with money. As we got to where we could breathe, the first thought we had was to make sure financial stupidity never happened to the Ramsey family again. The second thought was to safeguard the next generation. We declared not only that we would never be in that situation again, but also that we would permanently sear proper money principles into our children’s beings so they would never be in the same situation. We declared that we would change our family tree.
So Sharon and I, that scared and scarred young couple, made the declaration that where money was concerned, we would start a new family tradition—a tradition of money knowledge, money character traits, and wealth. The good news is, it worked. Our lives and family tree have been changed because we have raised three money-smart kids.
This book is about you starting a new family tradition with money. Rachel and I are going to teach you practical, tactical, spiritual, and strategic principles that will change your family tree. You will either intentionally teach your children how to handle money or they will live in your basement until they are forty. You will either model how to handle money or they will struggle like the rest of our culture, where common sense isn’t common.
I will never tell you that the Ramseys have it all together or that we’ve done the things in this book perfectly every time. There were times I was an awful money dad. There were times Sharon folded under the pressure of a whining kid in a store aisle. We are not perfect, nor were we perfect when raising our money-smart kids. But we did model good money principles, and we tried hard to intentionally create teachable moments about money for our children.
You may be late to the party with older kids. You may be excellent with money or not. You may be just starting your family. Wherever you are, you can teach from today forward and begin a new family tradition with money. You don’t have to be perfect, nor do you have to be paralyzed by the mistakes of the past. You simply have to start. You can start today and grow money-smart kids.
While we have never perfectly executed the money-smart principles we teach in this book, we have succeeded in raising money-smart kids. Of all the successes, accolades, and fame I have been blessed with, what I am most proud of are my children. Sharon and I have three competent, confident, poised, and wonderful adult children. They are winning at their spiritual walks, their marriages, and their careers, and all of them handle money well.
Our daughter Rachel has become a world-class communicator teaching these principles to audiences of every age and size all across this country. Her favorite thing to do is guide and teach families how to start new money traditions like we did. Of course I am her proud dad, but as you read her words, you will quickly say to yourself, I want to raise kids like her. And you can.
The bottom line is this: If the Ramseys can go from stupidity on steroids, to bankruptcy, to a new family legacy and a new family money tradition, you can too. Hold on. This is going to be a wild and exciting ride.
CHAPTER ONE
I Was That Little Girl . . .
RACHEL: “And we’re back. Joining us now is Rachel Ramsey . . . er, I mean Rachel Cruze, the daughter of financial expert Dave Ramsey. Sorry about that, Rachel.”
So goes the opening line of pretty much every television segment I’ve been on for the past several years—at least since I got married. I guess that’s the danger in growing up Ramsey. My dad has developed such a huge reputation as “that money guy” for more than twenty years that a lot of the crowds I speak to or TV hosts I visit with just can’t shake the association. And you know what? I’m totally fine with that. I’m proud of my family and the way I was brought up, but I always need to clarify something with those who only see the “Ramsey” instead of the “Rachel”: My story is not like my parents’ story.
I’ve never gone broke. I’ve never lost everything and declared bankruptcy. I’ve never felt the shame and pain of having bill collectors call at all hours of the day and night. I’ve never bought food and freaked out in the checkout line because I wasn’t sure I’d have enough money afterward to pay the power bill. But my parents went through all of that and more.
I was six months old when Mom and Dad filed bankruptcy. Dad had been doing real estate deals for a few years at that point, and he had gotten pretty good at it. By the time he was twenty-six, he had a portfolio worth about $4 million. He and Mom had lived the high life for a while, and my older sister, Denise, was born at the peak of their success. Then, as a result of a lot of bad business decisions, just as Mom and Dad were trying to figure out how to be parents for the first time, everything fell apart.
Dad’s whole business at the time was built on debt. He owed millions of dollars on his investments, and one day, the banks called his loans out of the blue. Problem was, he didn’t have a few million bucks in the bank to pay the notes. He got sued. A lot. He describes it as “a bazillion times.”
I was born in April 1988. Mom and Dad declared bankruptcy that September. Dad describes it like this: “After years of fighting it, with a toddler, a new baby, and a marriage hanging on by a thread, we hit bottom.”
They hit hard.
But hey, I was only six months old. I had no concept of money. I didn’t know how it felt to be broke or what it meant to be wealthy. I had never been on the fancy vacations or owned the expensive clothes and jewelry. Some might say I was born right at the worst time: the crash. I see it differently. I think I was born at the perfect time: the fresh start. I didn’t have to see them lose everything; I got to see them rebuild everything and learn the lessons that have since helped countless other families get out of debt. That’s the really exciting part!
Back in those days, Dad was doing a lot more than simply trying to figure out how to keep the lights on and food on the table. He was trying to figure out how money really works. And as a new Christian, he was trying to learn what the Bible says about money. Along the way, he started laying out some principles about how to handle money that eventually grew into a small Sunday School class, then a book, and then a full thirteen-week class that millions of families have now attended. He started hosting a daily talk radio show, which now has millions of listeners every week, and he wrote a handful of other books that walk families along the road to financial peace. Dad’s definitely been busy!
It cracks me up when I hear people talk about “Dave Ramsey” like he is Bono or Mother Teresa. To me, he’s just my dad. And all these books and tools and principles that people have used to take control of their money? All of that started in our living room.
You see, mine was the very first family to go through “the Dave Ramsey plan”—and trust me, it wasn’t always easy. There’s been a lot of fun that’s come from being a Ramsey, but my older sister, Denise, my brother, Daniel, and I had to work—and work hard—for the blessings we’ve received. Being Dave Ramsey’s daughter didn’t guarantee that I�
�d never struggle with money; knowing and applying Dave Ramsey’s principles did. This stuff works for me just like it will work for you.
I’ve been living and breathing these principles my whole life. Before I could walk, Mom and Dad were already fighting their way out of bankruptcy and starting to implement the principles that would eventually help other families get out of debt and win with money. Now, with a lifetime of training, I’m a professional speaker, and I travel the country teaching people the principles that my dad taught me.
My husband, Winston, and I are like any other family on the Dave Ramsey plan—we work, give, save, and spend in a way that’s already setting up a legacy for our own future kids and grandkids. We do a monthly budget, we plan for big expenses, and we never even consider debt a useful tool. From the very beginning, my parents gave me a legacy of debt-free living, and that’s one of the best gifts any parent could ever give their kids.
It Happens Every Day
Every day, people call into The Dave Ramsey Show to scream at the top of their lungs, “WE’RE DEBT FREE!” These are families who have been working hard, sometimes for several years, to get out of debt and change their family tree forever. These are moms and dads who have been working two or three or five jobs to break the chains of debt. They’ve fought and climbed their way out from under a pile of car loans, credit card bills, and student loans, and they are excited. There’s something in their voices when they tell their story; you know they will never again put their family back into debt.
Often, these families drive to our office to do their debt-free call from our lobby. We have this awesome café in our lobby called Martha’s Place that always smells like cinnamon rolls and fresh-baked cookies. Think of it like walking into your grandmother’s kitchen on Christmas morning, like you’re stepping into a cloud of homemade joy. Trust me; it’s amazing.
Martha’s Place sits opposite of Dad’s radio studio, so visitors and debt-free callers can come in and watch Dad do the show through a glass wall separating the studio from the lobby. Sometimes I’ll see a family walk in, and I’ll know immediately why they’re here. I can tell they’re a mix of exhausted and excited and usually a little nervous. It’s easy to see that they’ve been in a car for several hours to get here. The dad stretches out his back while a shy little four-year-old girl wraps her arms around his leg. The mom walks in holding a sleeping baby. And then there’s a hyper seven-year-old boy who hits the lobby like a horse coming out of the gates at the Kentucky Derby!