by Dave Ramsey
I really want to stress the fact that there’s nothing “right” about being a saver, and there’s nothing “wrong” with being a spender. This book is absolutely not about how to change your little spender into a saver. The goal is to recognize who God uniquely created him to be and to teach him how to handle money, no matter what kind of personality he has. If he’s a spender, then let’s teach him how to be a wise spender (who can also learn to save money). If he’s a saver, then let’s teach him how be a wise saver (who can learn to spend money).
Let’s face it—there are pros and cons to both sides here. Spenders tend to be incredibly generous people, probably because they aren’t that concerned with holding on to their money. But spenders can also make impulsive decisions and end up with nothing to show for their hard work. Savers, on the other hand, tend to be naturally patient and more responsible, but they can also become stingy and have trouble spending—or giving—a dime. That’s no way to live, either! Bottom line: If you have a spender, that’s okay; and if you have a saver, that’s okay. Neither is better or worse than the other. But it is important to figure out which type of money personality your child has and direct him toward wise decisions and money habits that are right for him.
DAVE: Every one of us has natural strengths and natural weaknesses, and that goes for our tendencies with money, as well. Look for your child’s natural strengths and help him or her grow in those areas. Remember, though, that the biggest strength can become a weakness when overdone. A natural saver is great until he never spends and is tight-fisted with giving. A natural spender is great until she finds herself deeply in debt and unable to give. A natural giver is great until there are no savings when a problem arises and there is no personal enjoyment of money. So monitor your children’s money strengths and help them keep balance.
Every one of us has natural weaknesses. These are the easy areas to spot and correct with each of your children, but, again, do the correction through the lens of each child’s uniqueness. If you are a natural saver and your child is a natural spender, be very careful not to make your personality the right one and your child’s the wrong one. As a natural spender, the main reason I learned to discipline myself to save was not to become a natural saver. Instead, I save so I have more to give and more to spend. You may have to force children to engage in their area of weakness like you “force” them to brush their teeth, but if you can teach while you are requiring the behavior, you will make a lasting impact.
LEARNING HOW TO SPEND WISELY
RACHEL: I think it’s pretty clear that six-year-old Rachel wasn’t a wise spender that day at Opryland. Even though my parents taught me then and there that money was finite, it was still a lesson I bumped up against for a long time after that. You can’t just flip a switch to suddenly turn your children into wise, empowered spenders. Plus, you don’t want to go so far that you make your kids think there’s something wrong with spending money. There’s not! It’s like my dad always says, “Money’s fun . . . if you’ve got some.” You need to help your kids understand that it’s okay to get some nice stuff, as long as they can afford it. There are some specific things you can do to guide your child in this area, and these things are true whether she’s a spender or a saver and whether she’s six or sixteen.
Be an Example
Your kids are watching you. The most important thing to do when it comes to teaching your children how to be wise spenders is to be a wise spender yourself. I truly believe more is caught than taught. That means what you do is so much more important than what you say. If you tell your kids they need to be patient when making a big purchase, but then they see you run off and buy a new flat-screen television on a whim, they will notice the contradiction.
This is true with emotional spending too. Dad and I talk to so many adults who struggle with buying things for the wrong reasons. It’s as though they’re trying to medicate an emotional need with a new car, purse, TV, or pair of shoes. Let’s be honest, ladies, this is a real problem for us sometimes! In a report called Sheconomics, researchers studied female spending habits and found that the most common reason a woman goes on a “shopping spree” is to cheer herself up. Almost eight out of ten women surveyed said this is why they shopped. Does it work? Not very well. One-third of that same group reported feeling guilt or shame over a shopping trip within the past week.1 What makes this so much worse is that your kids are watching you. If you go to the mall or Home Depot every time you’re stressed, sad, or emotional, your children will pick up on that. No matter what you say about money, they’ll get the message loud and clear that the only way to be happy or get over a bad mood is to go out and spend money.
DAVE: The phrase “retail therapy” floats off the lips of adults with a self-indulgent, childish smile. When you are so immature that you stand in front of your family and openly proclaim you are going shopping to buy something so you can feel better, you are not cute or funny. You are sending a horrid message to your children. You are saying to them that anytime they feel sad or have problems, buying stuff will make it all better. Really? When buying things becomes a coping mechanism, you have truly fallen off the cliff of materialism. You are putting scripts in the minds and spirits of your children that can take them decades of debt to overcome.
Your example is everything when teaching your children about money. How many of us as parents have opened our mouths and our mothers’ or fathers’ words have come out? Your children are going to become a lot like you, so to the extent that you want them to win with money, you better get about the business of winning with money. They will spend like you, save like you, give like you, budget like you, and fight with their future spouse about money . . . like you. Even our facial expressions are learned from our family. What are you modeling?
RACHEL: Parents can also get in the habit of buying things for their children out of guilt. This is especially common in single-parent and divorced households. Mom or Dad feels guilty about not being able to spend as much time with their kids as they’d like, so they try to make up for it by buying them a ton of stuff. I’ve had a lot of teens tell me about their “two Christmases.” Occasionally, the parents in those situations actually try to outdo each other, which puts their children in the middle of a weird tug-of-war where everyone loses.
DAVE: When one parent attempts to buy love after a divorce, the Disney Dad syndrome sets in. This is frustrating for the other parent who is trying to act like a grown-up and parent with strength. Most family counselors concur that even if you cannot get some agreement in parenting styles with your ex, be careful to never talk trash about him or her, especially in front of your children. The only option you have is to say positive things about the former spouse. Explain to the children that when they are with you, the money lessons will continue because you love them so much and care so much about their future.
In any relationship, remember there is not enough money on the planet to spend or give your way out of guilt. Showering your children with gifts will not erase your feelings of guilt for the divorce or for separating your children from their other parent. When you attempt to buy your children’s love, you are being selfish. In an effort to make yourself feel better, you are sending really confusing messages to your children about how life works or doesn’t work.
RACHEL: Sometimes parents spend money because they feel sorry for their kids. Maybe their daughter loses a soccer game, doesn’t make the school play, or gets cut from the band. Who wouldn’t want to make her feel better, right? Some parents try to mask the pain and disappointment by buying her things. Parents, please watch your behavior here. We’ll talk a lot more about this later when we cover the concept of contentment, but for now, let me remind you that it’s up to you to teach your children that spending money won’t bring them contentment or fulfillment, and it’s not a magic cure for heartache.
Let Your Child Fall Down
I firmly believe that a lot of people make huge, expensive mistakes as adults simply because they were never
allowed to make small, inexpensive mistakes when they were kids. Many parents try so hard to protect their children from the pain of hard lessons that they never develop the wisdom and toughness that only come by experiencing failure. Mom and Dad were great in these situations; that day when I blew all my money in five minutes at Opryland was a perfect example. They didn’t say, “Rachel, that’s the stupidest thing you could have spent your money on. What a waste.” No, that’s what control-freak parents say. But they also didn’t enable my bad behavior by opening up their wallets and giving me an endless stream of one-dollar bills. They knew I’d just keep throwing that money away at a carnival game I’d never win. Instead, they had a balanced response, and they let me make mistakes and learn from them.
Your children are going to learn some hard lessons when it comes to money. They are going to make some bad decisions, maybe some really bad decisions. But that’s okay. That’s how we learn. So it’s not a matter of whether or not they will make a mistake; it’s a question of what size mistake they’ll make before they learn how to control their spending. As a parent, you’ve got to let your children fail so they can learn from their mistakes early, when the stakes are low. Making a stupid decision with a video game purchase at thirteen isn’t quite as devastating as making a stupid car-buying decision at twenty-three.
Teach the Opportunity Cost of Money
Opportunity cost is one of those fancy financial terms that some people choke on. Let me make it easy for you: If you spend all your money on X, then you can’t also spend that money on Y. This one is pretty easy to explain to your kids. Use an example they care about, such as, “If you buy this video game today, you won’t have the money to buy the new game that comes out next month.” Sometimes it can be hard for a child to weigh the value of future happiness against the immediate thrill of buying something today. The key question is, “Will you be as happy about this decision when the new game comes out next month?”
Patience Is a Virtue . . . Really
One of the best ways to avoid a bad purchase is to simply wait overnight. Regardless of how young or old you are, waiting overnight before making a big purchase completely changes the buying decision. That was the rule in our house growing up—even for my parents. Dad’s a spender. So early on, Mom and Dad agreed that neither one of them would spend $300 or more without first talking to each other about the purchase and waiting at least overnight so they could sleep on it. I can’t tell you how many things Dad didn’t buy because they didn’t seem as important the next morning.
I remember the day Mom suggested this delay technique to me. I was thirteen years old, and Mom and I were out shopping. I saw a shirt that I really liked, but I kept going back and forth on the decision. I’d look at it, hold it up and look in the mirror, then put it back down. This went on for a little while, but I ended up deciding to buy it (with my own hard-earned money, of course). My mom watched all this happen, and she strongly encouraged me to put the shirt on hold overnight so I could think about it some more. I said something like, “But, Mom, I really like it. If I leave it here, someone else will buy it!”
My mom is really wise about this stuff, and she finally convinced me to leave it with the sales clerk—after I made the salesperson promise three separate times that the shirt would still be there waiting for me the next day. Can you guess what happened? By the time we got home, I had decided that I didn’t really want the shirt after all. The next day, I had forgotten all about it. I never went back to get it from the sales clerk who swore she’d hold it for me. It might still be sitting behind a counter somewhere with my name on it.
Fast-forward several years to my junior year of college, when I was in a similar situation. Only this time, Mom was 200 miles away and I was on my own. I was in a store and saw a cardigan that I fell in love with; however, it had a $120 price tag, which definitely made it a major purchase for me. I remembered what Mom and Dad taught me about waiting overnight, so that’s what I did. The next day, I decided that I really did want it, so I went back and bought it. I loved it so much that I wore it regularly for the next five years. That was definitely a good purchase for me.
Show your kids that waiting overnight takes the pressure off. It gives you permission to leave the store without the item, and once you leave the store, it’s often as though a fog lifts from your mind and you can think clearly again. If you wake up the next day and it still feels like a good purchase (and you can afford it), then it’s probably a good purchase for you. Go for it, and enjoy it!
Learning the Art of the Deal
I woke up the morning of my sixth birthday with only one thought: Will I finally get her today? Were they able to find her? Later, as I tore open all my birthday presents, I started to get worried. There was no sign of her, and there was only one gift left to open. Could it be her? I remember tearing the wrapping paper off that last box, and then my heart skipped a beat. There they were: the two words that give life to six-year-old girls across the country . . . American Girl. They had gotten her; I finally owned my own American Girl doll! Could life get any better? Yes, apparently it could.
You see, in the box with my new doll was something I had never imagined: an American Girl catalog. That little magazine opened my eyes to a whole new world of things that I absolutely had to have. There were other dolls, and those dolls had clothes and accessories and even furniture! I started freaking out, saying, “Mom! Dad! Did you know they have furniture for these dolls? I have to get some. My doll needs somewhere to sit!” They laughed, wished me a happy birthday, and sent me off to play with my new American Girl.
A few hours later, Dad came up to me and told me he had an idea. We got in the car and drove to the local flea market. He said, “Rachel, let’s walk around here. If you see any doll furniture that you think would work with your new doll, let me know.” So Dave and little Rachel walked around for a while, and soon my eyes landed on some beautiful white wicker doll furniture. I got really excited and pointed it out to Dad. He said, “Okay, I’m going to go over there and talk to the man who’s selling it, and we’re going to get it for less than he’s asking. That’s called bargaining. Got it?”
We walked over and Dad struck up a conversation with the guy. Dad had this cool, casual way about him. I was about to burst I was so excited about the furniture, but Dad basically acted like he didn’t care if we got it or not. I watched Dad and the seller go back and forth for a few minutes, and then they shook hands. The deal was done! Dad leaned down and said, “He was asking fifty dollars, but we got it for thirty-five. That’s a pretty good deal.” I remember thinking, Wow! My dad is the coolest! That was the day I learned the power of bargaining and negotiating.
Now that I’m an adult, I know that pretty much everywhere else in the world, buyers negotiate prices with sellers on almost every purchase from food to clothes to houses. But here in America, we tend to walk blindly into a store, pay whatever is on the price tag, and walk out. We never even ask for a deal! Sure, we might do it when we’re buying something really big like a car, but otherwise, we just accept the notion that “the price is the price.” Most of the time, it’s not. Parents, I encourage you to find small ways to show your kids the power of bargaining. My dad taught me that lesson when I was six, and even though I’m a proud spender, I never go into any purchase without looking for—and asking for—a good deal.
DAVE: When you model for your child how to negotiate, you are teaching him to face conflict. Negotiating price is a type of conflict. Teaching a child to enter a discussion over price with a win-win spirit teaches him to fight to get the best deal while keeping the other party’s dignity in mind.
Also teach your child to make wise purchases by gathering a ton of information. Gathering information about a potential purchase takes the immaturity and the impulse out of the purchase. It emotionally slows down the transaction and makes even a child look at the purchase with more wisdom.
Spenders and Savers Revisited
RACHEL: I hope by now
you see that there’s absolutely nothing wrong with being a spender. Like any other part of your child’s personality, it’s a natural part of who he is. It is something that you should direct and nurture, not something you have to correct. I’m so grateful my parents gave me the chance to grow into a wise adult spender instead of trying to force me into some mold of how other people think “Dave Ramsey’s daughter” should act. I’d go crazy pretending to be a natural saver! Of course, that doesn’t mean I don’t like saving money. I do . . . a lot. So in the next chapter, we’ll look at the other side of the coin and discuss how and why to nurture your little savers.
CHAPTER FOUR
Save
Wait for It
RACHEL: For two years of my life—from age fourteen to sixteen—I had a single, overriding, obsessive thought. One desire kept me focused. One goal made me willing to give up weekend nights out with my friends. One ambition made the endless hours of babysitting and odd jobs worthwhile. One dream kept me from blowing all my hard-earned money on clothes, music, and movies. Just one thing: a bright yellow Nissan Xterra.
Every time Mom dropped me off at a babysitting job instead of the mall, or Denise and I were driving to Dad’s office with food in the car for Your Integrity Snacks instead of heading to the pool on a hot summer day, I dreamed about sixteen-year-old Rachel sitting in the driver’s seat, music on, windows down—in her very own car. That SUV was more than just a car for me. It represented freedom. Every time I thought of what my life would be like after my sixteenth birthday, that yellow Xterra was in the background. Problem was, my parents had been extremely clear with us kids from the beginning: They weren’t going to buy each of us a car outright. If we wanted a car when we turned sixteen—or at any age—we had better get to work and save up a pile of cash. That’s when this little spender learned to do some serious saving.
