Smart Money Smart Kids: Raising the Next Generation to Win With Money

by Dave Ramsey

  Enabling is the enemy of motivation. Doing and providing everything for your child throughout her whole life leaves her totally unmotivated as an adult. Please hear me, though: I want you to bless your kids. I want you to throw big parties and give fantastic gifts when it’s appropriate and fits in your family budget. But I want those parties and gifts and vacations to be blessings, not curses, to your children. When you give them the “stuff” without giving them the character to carry it, all those things you think are blessings actually pile up on your kids’ backs and cripple them. They can’t stand up straight with dignity because they’re always looking for the next thing they deserve. They’re looking for the next handout, and they become adults who don’t understand why people aren’t crawling out of the woodwork to make their lives more comfortable. When that happens, you’ve got a train wreck on your hands, and that entitled, enabled young adult will likely end up living in your basement. And he may try to stay there forever!

  Raising Arrows, Not Boomerangs

  DAVE: The psalmist said, “Like arrows in the hand of a warrior, so are the children of one’s youth” (Psalm 127:4 NKJV). This is a great word picture to remind us that our children are to be released into the world. If they are strong and true, they will fly straight just like an arrow that is properly formed. It is gratifying to pull back a bow, let an arrow fly, and watch it strike the bull’s-eye. Unfortunately, in our soft and wimpy culture, we are not releasing arrows; we are releasing boomerangs. We throw them out, and they come right back. A guy called the radio show one day saying he figured out how to prevent grown children from living in their parents’ basements: Buy a house without a basement. In this book, we want to give you the tools you need to avoid having a forty-two-year-old child move back into your basement.

  In the United States today, 19 percent of males ages twenty-five to thirty-four are living with their parents.1 If this is because they are in college, then either they have been in school at least three years longer than normal or they are just returning to college. This statistic says one out of five young males have “failure to launch.” We have an epidemic of young men in this country who refuse to act like men and stand on their own. They have never known the dignity of making their way in the world. It may seem mathematically efficient for your sons to live with you to “save money,” but in most cases, this only creates a mess for them.

  Safety Net, Not a Hammock

  I am all for taking in a grown child temporarily when there is a crisis. Loving parents providing a safety net is a great thing. On the other hand, you should not allow the safety net to become a hammock used by a listless, lazy, unmotivated video-game expert.

  When should grown children be allowed to live at home and under what circumstances? Well, that is certainly up to you, but the longer they are rescued, coddled, and enabled by you, the more their spirits will atrophy. They will become flabby and not have the character or the fight to win in the marketplace. I would suggest you only take this chance in extreme crisis and/or for short periods of time. If someone is recovering from a medical problem, divorce, drug addiction, or even a job loss, then temporary housing is reasonable. Moving home in order to save more money really should not happen unless, again, it is for a very short period of time.

  The grown child rotting in your basement is spoiling. How do you know if you are enabling an adult child living at home? If he refuses to look for a job, he stays out late and sleeps in even later, and he doesn’t do his own laundry or prepare his own food, then those are sure signs you have a parasite in your house. Too much TV and video-game time are other sure signs you have a serious problem on your hands.

  If you allow your grown child to move home for a safety net while working through a crisis, you must be very specific about your expectations. First, you must put an agreed-upon time limit on how long he or she will be there. This deal is not in perpetuity.

  Second, they must be taking steps to solve their crisis. If they are just hiding out from the world, you are not doing them any favors. I would not charge rent, but I would require personal behaviors that promote healing as your rent payment. Instead of rent, you might require they spend three hours a day on their job hunt, they do a budget and show it to you, they save a certain amount of money monthly, they exercise, and they keep good adult work hours, not party-animal hours. These types of things are for their good. They act as a net for safety, not a hammock for napping. Nets save you, but they are not comfortable.

  Third, if they are in your home, they must act according to your value system and your rules. At our home, those rules would mean no drugs, no overnight guests sleeping in their bed, regular church attendance, coming home at a reasonable hour (we are not a college dorm), and pitching in by doing chores around the house. (By the way, I abide by those rules myself, and Sharon lets me stay.) And if they feel like all this is too controlling, they can find somewhere else to live. This is your home. You are being generous to allow them to stay as a guest, so they must use good manners and use this time to get their feet back under them.

  UNDERSTANDING FAMILY TYPES

  As Rachel and I travel the country teaching these principles, we are often asked questions about how to raise money-smart kids in certain family configurations. I want to drive by some of these types of families and look at a few things these specific households face. Before we do, you should understand that the things we have covered up to this point are essential to raising money-smart kids, and you don’t get a free pass just because your situation is slightly different. Regardless of the nuances of your family, your children still need to understand the basic money skill sets, or they will struggle financially.

  Conventional Families

  Let’s look at the so-called “conventional” or nuclear family—a father, a mother, and 2.3 kids all living in the home. That is how I grew up and how the Ramsey kids grew up. This household used to be the typical family, but conventional families are now in the minority. If this is your family, all we have talked about so far applies. I just have a few things for you to remember as parents.

  First, communicate to your kids that while they are a treasure and you love them more than life itself, Mom and Dad are first. Your children need to grasp that they are second to your marriage. I was in love with Sharon before my kids were even a thought, and she is still here now that they are all grown and gone. That was always the plan, and our kids knew it. Dad’s first priority is Mom, and Mom’s first priority is Dad. This sets the table nicely for Mom and Dad to teach and lead the children through the life lessons of handling money. Oddly enough, in homes where this concept is understood, the children feel very secure and are more confident.

  Second, the parents must present a unified front. This is a battle with two big people against the little people for the good of the little people. Your sweet, little savages are experts at the divide-and-conquer strategy. If Dad and Mom don’t both enforce chores and the principles of giving, saving, and spending, the children will not take them seriously. It would be very difficult for only one parent to teach the smart money kids’ concepts and have them stick. So make a pact as parents that you are going to do this as a unified front and have each other’s back.

  Maintain a Unified Front

  RACHEL: I think every parent has a particular phrase that really gets his or her child’s attention more than anything else. It’s different for every family, and I promise your kids know what yours is. Whatever it is, when your children hear that phrase, it stops them in their tracks. They know they’re in for it—that they’ve pushed the boundaries a little too far. For my dad, that phrase was, “Never talk to my wife that way!” If you ever heard that phrase in our house, you can bet there was a Ramsey child in some serious trouble, because it meant one of us had done the unthinkable: We had talked back to or disrespected our mom.

  When I was young, I always thought it was weird that Dad would get so worked up about that. In my little-kid mind, Sharon Ramsey was my mom. That’s it. Tha
t was my whole perspective. I couldn’t figure out why Dad got so upset when we gave Mom “attitude.” But now, looking back at those moments warms my heart. As an adult, I realize he was a man protecting his wife from someone who was treating her poorly—even if that someone was their own child. What a message to send your children! Denise, Daniel, and I knew Mom and Dad were a team, and trying to get between them or play one against the other was the worst mistake we could make. Dad always made it clear that no matter how much he loved us, his first priority was his wife.

  It was a more powerful example to me than I had even realized. As an adult, subconsciously, one of the big reasons I fell in love with my husband was because he was a man who would stick up for me no matter what. If you’re married and you and your spouse are raising a child together, it is critically important for both of you to present a unified front to your kids. They may not always like the results, but in the end, it develops stability and security in your family.

  Single-Parent Families

  DAVE: The single parent who is raising children alone has a tough fight. In this section, I am not going to address situations where another parent is still involved. That will come later. This is for the single mom or dad who is going it alone because of the death of a spouse, a divorce where there is no further contact, or simply any reason that the other parent is not there.

  If this is your situation, you must continue to teach all the lessons discussed in this book and follow the principles. They do not change because of your circumstances. But there are two additional—and critical—things you have to do to make sure you raise money-smart kids. First, stand your ground, and don’t let your kids try to convince you that you are wrong just because they outnumber you or because they know you don’t have a spouse to back you up. Once you decide to implement sound money-management principles, you can expect a rebellion among the small savages. They will try to convince you that you have lost your mind and that joining this cult was a bad idea. The single parents I have coached often suffer from battle fatigue because they are substantially outnumbered. Take this as your reminder: Just because you are the only adult in the house does not make you wrong. As a matter of fact, it usually makes you right. So resist the claims that you are an overbearing tyrant when it comes to money; be strong, persist, and grow money-smart kids.

  Second, if you are going it alone on the parenting front, you should call in reinforcements. It’s essential to surround yourself with a community that is in agreement with your goal to raise money-smart kids. You can’t do it alone. A guy recently called my radio show and told me that he and his wife had been working our system for fifteen years. They had become debt-free and wealthy. He said the most rewarding part is that he is now mentoring his ten-year-old niece and fourteen-year-old nephew on money. They are being raised by his sister (a single mom), but both kids asked the aunt and uncle how they can become wealthy like them. This single mom has reinforcements. You may not have a rich sister or brother, but you can bring in youth pastors, extended family members, and friends to help you out. You could even adopt an older couple who are empty-nesters to act as surrogate grandparents in your money-smart kids program. Let your little community know what you are teaching in detail so they can reinforce the messages and lessons.

  Parenting after Divorce

  When both parents are still involved in the kids’ lives after a divorce, sadly they seldom work together for the good of the children. Obviously the best scenario is one where both households, parents and stepparents, are all unified in the goal of raising the kids well and teaching them to be money-smart. Both families should read this book and follow the principles so you can have commission worksheets in both households and a plan for car purchases and college that both households are in agreement on.

  If your former spouse is unwilling to cooperate, you already know you are in an uphill battle on all aspects of raising your children. It’s really confusing for children to have two different value systems sending two different messages. But you can’t control what the other parent does. Implementing money-smart kid principles is no different than the other areas of disagreement. You can only control what happens in your home. Our suggestion is to avoid trashing the ex but to firmly apply the principles in your home. You no longer have 100 percent influence, but you will do what you can do in your home.

  As the stakes get higher in the teen years, I suggest you make it clear to your teen and even your former spouse that you will not be supporting or financing decisions you do not agree with. If the ex suggests that your children take out student loans for college and is willing to cosign for loans at a school that you don’t agree with and isn’t affordable, you are under no obligation to release the college fund you have saved. The same thing holds true for cars. Your message must be clear: You buy the car without debt, or you can’t drive it while living here. You go to a school I agree with and you can afford, or you get no money or help from me. It may sound harsh, but when your teen hears you firmly but kindly explaining the money-smart principles again and sees you sticking to them, he will be able to avoid huge mistakes.

  Be prepared: You will be made out to be the bad guy, but you are the only one in the whole picture who is using your brain. Every parent is tested frequently to see if what we want is smart and best or whether we will cave and let our kids do something we know is a bad idea. After a divorce, a parent still deals with that same test but with more emotion and less support for the stand you take. Take the stand anyway. Do what is right for your child, even if no one understands.

  Guilt Spending

  We mentioned the Disney Dad concept in Chapter 3—the idea that one parent buys everything in sight for the kid while the other parent is left looking like the troll because he or she actually uses common sense. A friend of mine who was a good dad went through a divorce that was his fault. He messed up, and his family fell apart. This dad, who used to have good judgment and who guided his children well, became Disney Dad. He bought the kids too many clothes, let them eat and watch anything, took them to Disney (hence the nickname), and generally spent all his income and time with his kids in the wrong ways. After a couple of years, we sat down to look at his messed-up financial picture. He had tons of credit card debt all because of how he was spending on his kids post-divorce. He made a profound statement that began his healing and led to him becoming a much better dad. He said, “You can’t spend your way out of guilt.” His guilt from his failed marriage was driving his unwillingness to say no to his kids. When he realized this and changed his actions, he was able to turn his whole life around.

  Disagreeing on Schools

  In Chapter 8, we discussed private versus public K–12 education. It is worth noting here that in a divorce situation, one parent can have strong feelings about private versus public schools that the former spouse does not agree with. In most divorce situations, the incomes are now split into two households and, in many cases, there is simply not enough money for private school to be an option. Unless your divorce decree or the judge says you are required to fund a private education, the decision is up to you, not your ex. Just make sure you can afford your decision.

  The same is true for funding your child’s college. Unless you have a court-ordered decree, you get to decide what you will do, and you should never go along with bad decisions coming from your former spouse. Once your marriage partner became your former spouse, you were freed from participating in his or her stupidity.

  Child Support

  Children are to be cared for by adults. Child support is the law in every state, and it should be. I know there are cases where child support is mishandled by the court or the opposing attorney and it becomes a crazy, confusing situation, but there are many more cases where the supporter does not do what he or she is supposed to do regarding care for their own children. This is despicable. Children are cared for first in your budget before you do anything for yourself. And if you marry someone who has children from a previous relationship, yo
u are agreeing to the fact they have children to support. It is ridiculous for you to marry someone with children and then gripe and whine that they pay child support. It is the right thing to do, and it is the law.

  Blended Families

  In a traditional nuclear family where all the children are biologically yours, you have to really take care that your children don’t divide and conquer you and your spouse. Since we know kids try to do this in a traditional family, you can certainly expect that the blended family is a divide-and-conquer battle waiting to happen. Many blended families do a great job of providing a healthy environment and avoiding the Cinderella Syndrome, allowing the stepmother/stepfather to be a loving parent as opposed to being cast in the bad-guy role. Every couple considering marriage should get premarital counseling, but you are really asking for trouble if you don’t get some coaching in advance when heading into a blended-family marriage.

  There are too many possible his/her/our scenarios to give each one attention in this chapter, so let’s look at some basic things that must be in place for you to teach your kids money-smart concepts and make them stick.