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

by Dave Ramsey

  Martha greets them and helps round up the kids. She sets them up with the headset and microphone and stands them in the right spot where they can see Dave inside the studio. And then, it’s time. After years of working overtime and extra jobs, after overcoming a lifetime of bad money decisions, after driving a stake in the ground and changing the course of their family legacy, it’s time to tell their story on the radio.

  As the mom and dad share the microphone, both jumping in to tell parts of the story, you can see the little boy and girl getting excited. They know they have a job to do—they’ve been practicing it in the car for the whole five-hour drive. They’re waiting for the cue from their parents. Then you hear Dave say those magic words, “Okay guys, count it down.”

  And this mom and dad, who have moved mountains to change the direction of their family, bend down so the little boy and girl can reach the microphone. You’ll hear the dad say, “Are you ready, guys? Just like we practiced. Three . . . two . . . one . . .” And then, together with mom and dad, you’ll hear these precious little chipmunk voices yell as loud as they can, “WE’RE DEBT FREE!”

  I cry almost every time. I just want to walk up to that little girl, put her face in my hands, look her in the eyes, and say, “Do you have any idea what your parents just did for you? They have changed your entire life.”

  You see, I was that little girl. After my parents’ bankruptcy, they could have gone right back into the old habits that got them into trouble in the first place. But they didn’t. They changed. They changed their own lives, and in the process, they changed the kind of life I could have. They taught me the keys I need to win with money for life.

  Growing Up Ramsey

  By the time I came along, Mom and Dad’s days of spending money hand over fist were gone for good. Shopping with Mom always meant at least five minutes in the checkout line sorting coupons. More than one of the stores we frequented nicknamed her “Coupon Lady.” I don’t think I’ve ever seen her pay full price for anything. She has a keen radar for clearance racks. She can whip out a coupon for just about anything. You think Dave Ramsey knows how to work a pair of scissors to cut up credit cards? You should see Sharon Ramsey go to town on the Sunday newspaper ads! Dad probably learned his famous scissor techniques from her!

  I never realized that we lived differently than other families. It didn’t occur to me that other moms walked into a store, pulled an expensive dress off the rack, and paid full price for it. That probably would have felt weird to me because I certainly never saw my mom do that! And wasn’t every family’s favorite vacation destination a public campground? No? Huh. Just us, I guess.

  The tight financial situation sometimes bugged me on Sunday afternoons. The Ramsey family went to church every Sunday. I sat in the pew in my sister’s hand-me-down dresses, tights, and patent leather shoes, and when it was time for the offering, I dropped in my dollar bill that I had taken out of my “Give” envelope (I’ll talk about this later). Giving was always a priority for our family. No matter how tight things got, Mom and Dad always modeled faithful, consistent giving, and they made sure we kids participated too. That was huge for us.

  Anyway, after church all of our friends would pile into their cars and head to local restaurants. Denise and I would begin begging to go out to eat before we even reached the car. And every week, Dad said something like, “We’re going to the best restaurant in town! The best! Nobody is going to eat better than we are today!”

  Early on, Denise and I would fall for it. The more he built it up, the more excited we got. We’d jump up and down and start asking, “Where are we going? Where are we going?”

  With a lot of drama, Dad would exclaim, “We’re going to Sharon’s Kitchen!” Translation: Once again, the Ramseys were eating Sunday lunch at home. Good thing our mom’s a great cook!

  I laugh about those times, but the truth is, they shaped me into who I am today. I know it wasn’t easy for Mom and Dad to stay focused for so long. I’m sure they would have loved to have eaten out every week with their friends from church too. But they had to tell themselves what they often told us: “It’s not in the budget.” And so we pulled up our chairs at Sharon’s Kitchen and somehow made it the best restaurant in town. Even after all these years, it’s still one of my favorites.

  Joining the Revolution

  By the time I entered kindergarten, our financial situation started to stabilize. We weren’t totally out of the woods yet, but the worst of the crisis was behind us. Dad had learned a lot about how to handle money, and around that time, he started putting it together in a class that would become Financial Peace University (FPU). At first, he offered it one night a week at a local Holiday Inn. The community’s interest in FPU started slowly, but it soon began to pick up steam. When the Monday night class filled up, he started a new class on another night. And then another. Before long, Dad was teaching FPU classes five nights a week. Now, more than twenty years later, millions of families have changed their lives by going through the class!

  Clearly, common-sense financial education struck a nerve, first in our community and then around the country. What my dad was teaching grew into something more than a class, seminar, book, or radio show. It became a revolution.

  Now I’m part of that revolution. I’m on a crusade to help families avoid huge financial disasters altogether. I help parents put their kids on solid financial ground from day one. I talk to teenagers and college students and show them how to be moneysmart and live debt free before they ever have the chance to go into debt. That’s what my parents did for me, and that’s what I want to share with young families and students.

  I like to say that my dad is the emergency surgeon, and I’m the preventative medicine. Nobody gets people out of a financial crisis like Dave Ramsey, but we’d both prefer it if people never got into that kind of mess in the first place. That’s become my crusade.

  In the following chapters, I’ll walk you through what it means to raise money-smart kids. I’ll explain how I learned the importance of a strong work ethic, and we’ll explore specific ways you can pass that on to your children. I’ll teach you what my parents taught me about spending, saving, and giving. We’ll talk about debt, why it’s so devastating for young people, and how to teach your kids to avoid it—especially when it’s time to head to college or buy a car. We’ll tackle some tougher topics like entitlement, enabling, and contentment so that you can help your kids define what “enough” means for them. We’ll talk about relationships and how money often gets in the way, sometimes actually destroying families and friendships. And finally, we’ll talk about how to raise children who have the emotional, spiritual, and moral backbones to receive the financial legacy you might leave them one day.

  I am so proud of my parents and how hard they worked to turn our family around all those years ago. They faced and overcame things I can’t imagine, but in the process, they put me in a position to win in a way they probably couldn’t have imagined themselves. I have never owed a dime to anyone. I will never owe a dime to anyone. I have been raised in genuine, lasting financial peace. That’s not because I’m “Dave Ramsey’s daughter.” It’s because my parents took the time and made the extra effort to teach me how to handle money. Because of them, I have complete confidence in my ability to manage my finances, no matter how much or how little I have. That is the best feeling in the world, and it’s an incredible gift you can give your kids too!

  Right now, you may be fighting some of the same battles my parents fought all those years ago. Or maybe you’ve already won those struggles and you want to help your kids avoid them completely. Either way, you’re in the right place. No matter where you are financially right now, whether you’re struggling or winning with money, I can give you a perspective you desperately need: the perspective of your children. After all, all those years ago, I was that little girl.

  CHAPTER TWO

  Work

  It’s NOT a Four-Letter Word

  RACHEL: When I was in f
ifth grade, I spent an afternoon at a friend’s house and saw the weirdest thing. I watched my friend’s mom clean her room, take our dishes to the sink after we ate, put her laundry away, feed the dog, and take out the trash, never once stopping to ask us to help. Right then, I knew my family was different.

  I’ve learned so much from my parents over the years, but one of the most fundamental lessons they taught me from a young age was that the Ramseys are hard workers. People may know about Dad’s radio show, our Financial Peace University class, our high school curriculum, our youth Bible study materials, or any of the dozens of other products and services we offer, but if you’re wondering what the Ramsey “family business” is, let me tell you from experience—the family business is work.

  As an adult, I look back at my childhood and I’m extremely thankful for all my parents did for me. But there’s one thing they taught me that I lean on literally every day of my life, and that’s how to work. I learned early on that work creates discipline, and when you have discipline in your life, you are a healthier person.

  There is no better feeling than coming home from a job and feeling tired. You know, the good kind of tired. The kind of tired that means you actually did something with your life today. Instead of allowing the next generation to sit in front of the computer or PlayStation all day, being lazy and lethargic, let your kids experience the feeling of being tired after some good, old-fashioned work. Raking leaves, cleaning the house, or being responsible for feeding the pet creates a sense of accomplishment, the sense that they actually did something that they can feel good about. It makes them feel confident that they can go out and win.

  DAVE: Our culture has made many wonderful advances to ensure the safety and well-being of children. But we may have taken this too far. Many parents today are so centered on what their children want that they have lost perspective on what their children really need. Perspective—looking at life over time—demands that you teach children to work. Teaching children to work is not child abuse. We teach them to work not for our benefit, but because it gives them both dignity in a job well done today and the tools and character to win in the future as adults.

  You should view teaching your children to work in the same way you view teaching them to bathe and brush their teeth—as a necessary skill for life. An adult who has no clue how to tackle a job and finish it with vigor is as debilitated as an adult with green teeth and body odor. If your child graduates from high school and his only skill set consists of playing video games, whining, copping an attitude of entitlement, and eating junk food, you have set him up to fail.

  Another huge benefit of teaching a child the wonder of work is that she will tend to lose respect for people who refuse to work. Why is this good? It is good because you want your daughter to marry Mr. Right, not Mr. Lazy. We noticed quickly that our daughters (and our son) didn’t pursue relationships with people who didn’t know how to work. This is great news, because someday you may have grandkids, and you want both of their parents to be productive so your grandkids get to eat.

  RACHEL: Cleaning our rooms was a standard chore in our house—one that I hated! I am not a super-organized person in general, and this trait was definitely worse when I was younger. Week after week, I was told to clean my room, and I put it off as long as I could . . . at least until I heard footsteps coming up the stairs to examine my work. Mom and Dad didn’t expect our rooms to look like military barracks, but they did expect them to look neat and nice. And even though I didn’t particularly enjoy the process, after spending just a few minutes cleaning and seeing the results, it was rewarding. I immediately saw what my hard work had accomplished, and it felt great.

  Work might be a challenge for your children, especially if they aren’t used to it, but what a blessing to give your kids. Of course, I’m talking about age-appropriate work; nevertheless, the value of work is needed and necessary. Proverbs 22:6 says, “Train up a child in the way he should go, and when he is old he will not depart from it” (NKJV). When your kids learn hard work from a young age, the habit will stick with them for life.

  Now, my dad is one of those people who never seems to have much trouble figuring out how to make money. Sure, Mom and Dad had some trouble keeping it for a little while during the bankruptcy years, but bringing home a good income was never really a problem. That’s because my parents have never been confused about where money comes from. It’s something my dad has told me pretty much every day of my life: Money comes from work.

  Even when my parents went bankrupt, it wasn’t because Dad didn’t work hard enough. He worked like crazy all the way up the ladder of success and down to their financial crash. Before the bankruptcy, Dad worked to build his fortune; after the bankruptcy, he worked to keep food on the table. The motivation changed, but the work ethic never did. My dad’s the hardest working person I’ve ever seen.

  He used to tell me stories about helping out with his parents’ real estate business when he was a little boy. My grandparents worked out of their home, so when the phone rang, there was a good chance that it was a client. That meant when eight-year-old Dave answered the phone, he did it like a full-time, highly trained receptionist. And my mom grew up on a farm, so she was no stranger to hard work either. She could probably out-work all of us all day every day and still get home in time to host an amazing dinner party!

  DAVE: As Rachel said, my parents were in the real estate business when I was growing up. That was “back in the day” when phones had cords and rotary dials. “Back in the day” when people still read newspapers and bought houses from things called classified ads in newspapers and real estate magazines. “Back in the day” when there were no cell phones, voice mail, email, Twitter, Facebook, or even answering machines. So you had to answer the phone or it didn’t get answered. When someone called my childhood home, they could be calling about buying a house, so if we didn’t answer the telephone properly or if we handled the call incorrectly, the sale could be lost. Answering the phone well was a big deal.

  We were taught early to greet the caller in a friendly and professional tone, especially when our parents were not available. We were taught to use our manners—“yes, sir” or “yes, ma’am” as opposed to “yeah”—and to take the caller’s phone number and information and then repeat it back to them for verification. This respectful manner of handling the phone was a standard part of our lives, and there was no tolerance for mishandling it. We understood early on the concepts of customer service and entrepreneurism. I guess that is why Sharon and I drilled those same kinds of things into our kids—and why I still can’t stand an unanswered phone.

  MAKE NO ALLOWANCES

  RACHEL: Work was never an option in the Ramsey house, no matter how young Denise, Daniel, and I were. From the time I was five years old, I was working—on commission. Mom and Dad didn’t believe in giving us an “allowance.” Dad hated that word. It implies that a child is “allowed” a certain amount of money just for living and breathing. Sure, every parent likes to bless his or her child with surprises and gifts, but the allowance system as a general rule doesn’t teach the child how real life works. My parents didn’t want to raise kids who expected life to make “allowances” for them. We see that way too much in today’s world.

  There’s a whole generation growing up thinking money is free. They expect their parents to keep paying their bills into adulthood, or they think the government exists to care for them. That mindset has never been an option for me—not even when I was a little kid!

  From age five on, I operated on one general rule about making money: Work, get paid; don’t work, don’t get paid. That’s a basic principle that a lot of parents miss with their little kids. If a child can understand that money comes from work at age four, then she’ll be ready to hit the “real world” running at age twenty-four.

  DAVE: I do hate the word allowance because I think words are powerful and can convey deeper meanings. When you make allowance for someone, it is because they are not able. Allow
ances for children sound like welfare to me, as if children are unwilling or unable to achieve, so we have to cover for them. Granted, they are our children and we do cover for them, but Sharon and I wanted to instill drive and dignity in our kids’ characters. These qualities do not develop when we hand everything to our kids, because then we give them the impression that they are the center of the universe. Handing out money and not teaching strong work habits create people who whine, who feel entitled, and who become perpetual victims. Does this sound like any adults you know? We taught our kids that the Bible says, “If anyone will not work, neither shall he eat” (2 Thessalonians 3:10), and we would quote verses like Proverbs 12:11: “He who tills his land will be satisfied with bread, but he who follows frivolity is devoid of understanding” (NKJV).

  I once took a radio call from a father of a rebellious fourteen-year-old son. The father said his son refused to do chores and help around the house. So this dad went to his workshop, got a hammer, and placed it on the teen’s plate at the dinner table. When his son came to dinner, the dad said, “No food until your chores are done, and if you continue to avoid your work, I am going take that hammer and break your plate.” We all know that the fastest way to a teenage boy’s heart is through his stomach. Not surprisingly, that young man immediately got to work. That may have been a drastic way to get the boy’s attention, but I guarantee he will probably tell this story to his children and grandchildren because it got the point across and hopefully set a new pattern for his life.