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

by Dave Ramsey

  She continued to tell us that only 27 percent of graduates do so in four years. So only 53 percent of students actually make it to graduation and only 27 percent do so in four years. That means of those who start school, only 14 percent of incoming freshmen will graduate in four years, and she was bragging about it. I reached across to Denise’s notebook and wrote, “So have a freaking plan!” If your child does not have a plan and follow it like her life depends on it, you (or she) will pay for it. And don’t forget, colleges are in the business of making money. They will try to convince you that the four-year plan isn’t realistic anymore. Don’t buy it! Earning a college degree in four years can be done.

  DREAM BIG

  RACHEL: I believe the two keys to graduating debt free are pretty simple: hard work and preparation. That’s true whether we’re talking about the parents’ ability to save up over time in an ESA or 529 or whether we’re talking about the student’s dedication to filling out scholarship applications and earning his own money. Your child can afford to go to college, but it’s not going to happen by accident—and student loans are not the answer. Remember, the only thing a student loan offers is short-term gain for long-term pain.

  I’d rather your child be like Kristina Ellis, author of the great book Confessions of a Scholarship Winner. Growing up, Kristina and her family lived below the poverty line for years, and it was clear her mom wouldn’t be able to write a check for Kristina’s college education. On Kristina’s first day of high school, her mom sat her down and told her she’d have to figure out what she wanted to do with her life. Her mother promised to take care of her until she graduated high school, but after that, she’d be on her own.

  What I love about this story, though, is that Kristina’s mom didn’t stop there. Even though they were living in poverty, this amazing mother encouraged her daughter to dream big. Together, they set a goal for Kristina to earn enough in scholarships to go to a private college for free. She had four years to work on this goal, and she thought about it every day. Kristina wasn’t a star athlete or genius-level brainiac either. Athletic scholarships weren’t an option, and she was a decent student with average test scores. She didn’t think she would get any scholarship money, but she never gave up the dream. She attended tutoring sessions before school to bring up her grades, and she started participating in after-school activities to round out her high school life. Her schedule began at 5:45 a.m. and ended at 9:00 p.m., but she never quit. In fact, she only got more and more focused.

  She poured her heart into every detail of every scholarship application, knowing every dollar she received in scholarships meant fewer hours she’d have to work while in college.

  Late in her senior year, the rejection letters started coming in. Lots of them. But guess what? She also received award letters—unbelievable award letters. One of the scholarships she won was for $20,000. Two other big ones came in from Coca-Cola and the Bill and Melinda Gates Foundation. Every day, she’d open the mailbox to find several rejection letters and a few key award letters. All of her hard work was paying off! She not only earned enough in scholarships for a free ride at Vanderbilt University, but she also had enough left over to pay for a master’s degree at another private university. In all, Kristina earned more than $500,000 in scholarships. Can you imagine that? In high school, this one young lady—an average student with a single mom living in poverty—worked hard enough to earn half a million dollars!

  The money is out there for your child to go to college. The process isn’t easy and it isn’t fast, but it’s free and available to every student who bothers to give it a shot. It doesn’t matter if your child is in preschool or high school, whether you have $200,000 in an ESA or just $20 in your savings account, your child can go to college debt free.

  CHAPTER NINE

  Contentment

  The War for Your Child’s Heart

  DAVE: Some of my favorite films are war movies. And no, it’s not just because I enjoy watching explosions or people fighting each other (although the action doesn’t hurt). The main reason is that I like to see a group of people fighting for something they actually care about—something worth fighting for. The goal is clear, and the enemy is in sight. There’s a passion and conviction in those stories you rarely see anywhere else. When I hear William Wallace’s call to arms in Braveheart, I want to march into battle with him. I want to grab a sword and shield and fight for freedom—for something that really matters.

  When the stakes are high and the cause is just, good men and women are inspired to go to war. They are willing to stand up and fight to the finish, if that’s what it takes. Well, I’m going to let you in on a little secret: If you are raising children in North America today, you are at war.

  Whether you want to be or not, whether you realize it or not, you are at war with contemporary culture. The prize is not land, money, or possessions; this war is raging for the hearts of your children. Recognizing the reality and the seriousness of the war—and what is at stake if you lose—is necessary if you hope to have a shot at winning.

  The heart of your child is under siege by endless marketing, pervasive peer pressure, and a choking shallowness from our contemporary culture. You can’t take this attack lying down. You have to rise up and fight continuously and fiercely to protect your child from these enemies.

  IT’S WILD OUT THERE

  We live in the most marketed-to culture in the history of the world. We are hit by more advertising impressions in a few hours than previous generations experienced in an entire year. Please understand: I am not against marketing or advertising. I use them with my products. But we must understand that the very purpose of marketing is to make you think your life is somehow incomplete without the purchase of a product or service. The essence of marketing is to make you dissatisfied with the status quo, moving you in the direction of a purchase that will supposedly relieve a manufactured psychological tension. This dissatisfaction has a name: discontentment.

  Buyer Beware

  Since we live in the most marketed-to culture in the history of the world, it is possible that we live in one of the most discontented cultures in history as well. In our Financial Peace University class, we teach a lesson called Buyer Beware, where we explore this discontentment and how it affects our purchases. Studies show that on average, the more advertising you are exposed to, the more debt you are in, so there is a correlation between the amount of TV you watch and the amount of debt you have. Why? Because you are being sold and sold and sold more “stuff.”

  As adults, we see how this discontentment leads to more purchases and more debt. We know it is bad—really bad. But when it begins to affect the hearts of our children, it reaches the point of near-evil. Your child is assaulted with marketing from the time he can process information. Advertisements between cartoons, a toy industry trying to meet quarterly profit projections, and parents asleep at the wheel are leaving the most vulnerable hearts open to the deadly disease of discontentment.

  Happy Holidays?

  The most persistent and sophisticated marketing is reserved for children. Think about how profitable “holidays” have become. Virtually every holiday now comes with mandatory kid purchases. Last year, Americans spent $8 billion on Halloween.1 Whatever happened to dressing up in some old clothes and getting simple treats from a neighbor? Marketing and profits have turned Halloween into an industry. And don’t even get me started on Easter or birthdays. Some parents and grandparents spend more today on a child’s birthday than we spent on a whole family’s Christmas a generation ago.

  Companies know if they can plant the need or desire in a child’s mind, they have employed the world’s best salesman to sell their product to Mom and Dad. There is nothing as relentless as a kid motivated to have “the next great thing.”

  There’s Always an Upgrade

  RACHEL: The ever-changing worlds of technology, cars, and fashion are probably the best examples of struggling with “the next great thing.” This is something that’s t
rue with kids of all ages—even “kids” of retirement age! It seems like a fast new phone, gadget, or clothing style comes out every day, and the gotta-have-it fire is spread by more than just TV commercials. As tech companies try to outdo each other, their latest products become actual news. From cable news to blogs, people love to report on the shiny, new thing from Apple, Samsung, Toyota, and other companies. They play out a very weird, very public game of trying to outdo each other, and the media, from marketers to reporters, give them the biggest stage possible.

  I know a guy who loves to watch Apple’s big product announcements. He tries to stay uninformed all day long so he can rush home and watch the full video of the event without having it spoiled by headlines or talk around the office. Personally, I think that’s crazy, but he loves it. I asked him why it was such a big deal, and he said, “I love their products, and I know I’ll probably end up getting whatever they announce. So I basically watch the event to find out what they’re going to make me buy each year.”

  I thought that was a pretty profound, honest (and, yes, kind of sad) statement: “to find out what they’re going to make me buy.” This is a grown man who handles his money really well—except for a particular weakness for pretty much anything this one company sells. He even admits he absolutely loves his iPhone from the day he buys it until the day the next one is announced. At that point, his current phone starts to look old and feel slow. The very announcement of the next cool thing somehow robs him of the joy of the cool thing he already owns.

  When I talk to teenagers, I tell them that if the newness of stuff is what funds their happiness, they are going to be a rat in a wheel for the rest of their lives. They will keep going around and around, thinking the next thing is the thing that will make them happy. But of course it won’t, so they just spin in circles, wasting all their time and energy and ultimately going nowhere. We live in a world where bigger is better and newer is nicer. But here’s the truth: There’s always an upgrade. There will always be a new “next great thing” fighting for your child’s money and attention.

  And as you can tell from my friend, the crazy Apple guy, contentment isn’t about age; it’s about maturity. I have met eighteen-year-olds who get this and forty-eight-year-olds who don’t. Contentment isn’t a money issue, even though it has a huge financial impact on your child’s life. It’s a heart issue. It’s an example of how so many people try to fill a void in their hearts by cramming it full of more and more stuff. As the parent, you’ve got to prepare your child to defend himself against this threat.

  The Best Protection

  DAVE: If you want to raise money-smart kids, you have to raise kids who are content. Yes, I know this is easier said than done. When I say you have to raise content children, your heart may skip a beat because you realize the war I am discussing is very real. But if you can foster a spirit of contentment in your children while they are under your roof, you have purchased the best insurance policy that they will win at life and money as adults. A content person can save, budget, avoid debt, handle relationships, and give exponentially better than someone who struggles with discontentment. The Bible says, “Godliness with contentment is great gain” (1 Timothy 6:6 NKJV). In our adult class series The Legacy Journey, we call the lesson on contentment The Law of Great Gain. This is one of our most popular lessons because contentment is something we all yearn for in our lives. We want to know how much is “enough” and how much is “too much” for our families. People with a right view of God’s ownership want to make sure they don’t fall off the cliff into discontentment as their income and wealth grow. We thoroughly explore these issues in that class because, for the past two decades, we’ve encouraged people to discover the keys to financial peace and contentment.

  In a nonstop, frenetic culture like ours, sometimes we confuse contentment with a lack of ambition, or we may mistake contentment with apathy. Those traits do not reflect contentment at all. Ambition is not even on the same spectrum with contentment. Contentment is a spiritual experience that allows peace in the middle of a storm, but that peace isn’t necessarily passive. It may very well be active. A content person still wants to do better and be better; he’s just not pinning all his hopes and dreams on that one thing. He may say, “If this is all I ever have, I’ll thank God and call myself blessed. But if I can grow and change and make a bigger impact on the world, then I’m going to do that.” A content person doesn’t avoid making decisions; he just doesn’t feel the pressing need to make rash or stupid decisions. It is not necessary to be stagnant or unmoving to be content. So content people may not have the best of everything, but they make the best of everything. That is who you want your children to be.

  It’s Not an Amount

  RACHEL: I love that line: Content people may not have the best of everything, but they make the best of everything. That speaks volumes to a child. Contentment isn’t based on an amount or how nice your stuff is. You may know some families who make $50,000 a year and are debt-free with a fully funded emergency fund and big retirement accounts, and you may know other families who make $150,000 who are deeply in debt with no savings and no retirement. Some of these families are looking for contentment in their income and possessions, but they’ll never find it there. Contentment happens on the inside, and when you have it, it’s there no matter how much money you make or how much stuff you have.

  HOW TO WIN THE WAR

  DAVE: We have established that there is a war in our culture for the hearts of our children. Left unchecked, the cultural forces will steal your children’s hearts and make them believe the lie that life consists of the stuff or experiences we buy. My goal here is to stir you up—to get you mad enough to go to war with that culture and win your child’s heart to contentment.

  No Mercy

  The first thing to remember in this war is to show the enemy no mercy. When the enemy known as Discontentment breaks through your battle lines and takes hold of your child’s heart, you must stomp Discontentment mercilessly until he is no more. The infection of this germ warfare is very dangerous, and you can give the enemy no quarter. At the first sign of a discontented spirit in your child, you must surgically remove it. You must act immediately, with precision and without mercy, knowing that your loving motive is to save the heart of your child.

  When peer pressure, marketing, or a materialistic culture threatens the heart of your child with discontentment, you must squash it immediately. Remind your kids that owning stuff is fine, but when your stuff owns you, when you define yourself by a purchase or an amount of money, you are on the road to becoming a disgusting human being. We are not at war with success, but the words your children use and their emotions around a particular transaction will tell you whether this is a healthy goal or whether they are trying to define themselves by owning the iPhone 73 “that everyone else has.” One clue to determining whether this is a healthy goal or a toxic identity issue is to see how old they act when discussing the purchase. If they respond appropriately for their age, it is likely healthy. But if they act three to five years younger than they are, then you know this is a toxic identity issue. When a thirteen-year-old acts like a four-year-old, then you know something is out of balance, and you must pounce.

  Don’t Join the Enemy

  The second thing you must do to win the war for contentment is to recognize you can’t defeat the enemy if you are part of the enemy. You can preach to your child all day long about not finding their identity in “stuff,” but if you are defined by your car, your latest trip, or your purse, your kid is going to follow your example and not your sermon. Rachel has said several times, “More is caught than taught.” There’s a reason for that: It’s true. If you are part of the culture of materialism, then you are siding with the enemy, and the war effort is doomed. You are heading toward defeat.

  I am not suggesting a minimalist lifestyle or that you can’t enjoy some nice things you have worked for, saved for, and paid cash for. I am saying your child knows where your heart is
regarding those things. If your new car gets scratched, do you have a complete nervous breakdown? If so, you are sending a message to your child—not about new cars but about the worship of new cars. There is a difference, however, between caring for and maintaining things versus worshiping things. Don’t we all remember an item our parents or grandparents had that was a prized possession? We all knew the emotional dynamite that was attached to that piece of “stuff.” We don’t want children to be out of control, breaking the family china. And we don’t want children to become adults who don’t maintain and care for things. But if Mom has to spend a weekend in the psych ward over a broken vase, then Mom has problems; it is not a vase problem.

  So a major step to winning the war is to remember your children are going to define happiness, contentment, joy, and their identity the way you do. You can’t defeat materialism in your kids if you are infected by it yourself. Search your heart and use the nobility of changing your family tree as motivation to clean up your discontentment act.

  Teachable Moments

  I really resist teaching life lessons to children by using a set curriculum taught only on Tuesday nights. Instead, Sharon and I always watched life unfold around us and our kids, and we looked for natural entry points to teach a lesson—a teachable moment. This is a third way to fight the war for contentment. Look for people who have lost the war—who define themselves by stuff and are living really shallow lives. When one of your child’s friends or one of your friends or even a family member is losing the contentment war in front of your child, discuss it with your child at the first opportunity. Ask your child questions about what she observed. You will be shocked at how philosophical a five-year-old can be. Be careful not to tear down the people involved, but make sure you destroy the idea that contentment comes from stuff. You are not teaching your child to gossip about Uncle Harry; you are asking if she saw how Harry was defined by his purchase.