I breezed through a great book a few weeks ago, and it’s perfect for today’s Money Monday post.
Smart Money Smart Kids: Raising the Next Generation to Win with Money is a brand new book from Dave Ramsey and his daughter, Rachel Cruze. If you’ve been following my Money Monday posts, then you’re familiar with the Dave Ramsey plan and all my talk about it. But, if you’re new to my blog, then right now you might be thinking Who is Dave Ramsey?.
No worries, you can click here to read the previous posts in my Money Monday series. You can also click “Debt Free Journey” on the menu bar at the top of the page.
I loved this book. That’s right; I’ll just come right out and say it from the start. Loved it! Since learning about Dave Ramsey and starting our debt free journey, we’ve had our eye on the goal of being 100% debt free. That goal started over 3 years ago. That means, for over 3 years, we’ve lived on next to nothing, so that the rest of our money can be put toward our debt at the end of each month.
Learning about living a debt-free life has really opened our eyes. We’ve learned so much, and once we’re out of debt, we never want to go into debt again. What a mess! Debt means living your life knowing that all the money you make is already spent. In other words, it’s not yours because it’s already accounted for. Talk about frustrating. Living this way means you’ll inevitably continue to go further into debt unless you make a conscious effort not to. We’re making a conscious effort to get out of debt and keep it that way. It’s not easy, but it is possible.
For us, it’s important that we teach our future children to live debt-free from the start. This means teaching them about money from an early age, which is what Smart Money Smart Kids is all about. I think it’s important for kids to see money in a positive light because, in the long run, it’ll allow them to live a happier, lower-stress life. Admit it—we all know that worrying about money is s.t.r.e.s.s.f.u.l. Steve and I don’t want that for our children, and I’m sure you don’t either.
In the book, Dave Ramsey and Rachel Cruze present a simple strategy for teaching kids about money. It starts with your kids earning commission, not an allowance. Dave Ramsey says that an allowance implies that a child is “allowed” a certain amount of money just for living and breathing. Working on commission is pretty straightforward—work, get paid; don’t work, don’t get paid.
If kids are earning money on a regular basis, then you have to teach them what to do with the money, instead of spending it all. So, the book introduces the envelope system for kids—you take 3 envelopes and label one with Spend, one with Save, and one with Give. Honestly, I’m not a huge fan of envelopes for this, so we’ll probably use labeled jars with lids. To each their own.
Anyway, say your kid earns $5 for the week. The idea is that you teach them to put $1 in the Give envelop first, then pide the remaining amount between the other two envelopes—$2 in the Save and $2 in the Spend envelope. This system teaches children the importance of giving to others, saving for the future, and spending a little on something you want or need now. A good balance, if I do say so myself.
Remember, I said this book is about teaching kids early, so you can start around age 3. The book recommends keeping it short and simple for youngsters, meaning about 3 chores per week at $1 each. Sounds reasonable to me.
As suggested in the book, for ages 3 to 5, chores can include the following:
- Picking up toys
- Putting dirty clothes in the laundry basket
- Making his or her own bed
- Matching socks in the clean laundry
- Setting the dinner table (with supervision)
- Collecting the indoor trash can from around the house
- Helping carry in light groceries
Oh, and pay the kiddos as soon as they complete the chore, not once a week as you would with older kids. The book makes a good point—younger kids don’t relate the action and the reward if payment is delayed, especially by several days. Make it exciting for the kiddos! They’ll think they’re rich. Three bucks a week? Shoot, as a kid, I was thrilled with like a nickel I found on my dad’s dresser.
So, what about older kids? For ages 6 to 13, chores can include the following:
- Making their own beds
- Feedings pets
- Vacuuming and sweeping
- Sorting, folding, and putting away laundry
- Cleaning the dishes
- Watering plants
- Cleaning windows
- Washing the car
- Doing yard work
- Cleaning the bathroom
The book suggests paying older kids on a weekly basis, such as every Sunday. Again, I find this reasonable. Something else to point out is that if kids mess up or break something while doing their chores, still pay them. It’s about the core principles, not about being a stickler.
The book also talks about finding ways to make money outside of the home as kids get a little older. Babysitting, walking dogs, and doing yard work for others are a few examples. I love the idea of making money other ways because it allows kids to get creative. I wish I’d learned to do this as a kid—I just focused on being old enough to work at a clothing store. Teaching kids about finding creative ways to make money could certainly help plant a seed for becoming a future entrepreneur.
Also discussed in the book are The Five Foundations for older teenagers. The Five Foundations include the following:
- Save $500 emergency fund (for a cracked cell phone screen, flat tire)
- Get out of debt
- Pay cash for a car
- Pay cash for college
- Build wealth and give
Can we talk about paying cash for college for a minute? As the book states, student loans are not the answer. Steve and I are in the mess of debt because we THOUGHT student loans were the answer. They are not. I repeat—THEY ARE NOT! Stepping off my soapbox now.
Anyway, it’s not as easy as paying cash for college. The book talks in depth about working hard to save money, of course. But, the bigger picture, as outlined in the book, but not mentioned in The Five Foundations, is applying for scholarships as a way to help pay for college. These two things combined—cash and scholarships—I can get on board with that. Makes perfect sense.
There is an incredible story in this book about a woman who paid for undergraduate and graduate school with scholarship money. She wrote a book herself, which I cannot wait to read. It’s called Confessions of a Scholarship Winner by Kristina Ellis. A book like this? It should be a mandatory read for EVERY high school student. Heck, for every middle school student.
As you can probably tell from this long post, I thoroughly enjoyed this book and all that it offers. There is such power in learning about money and living a debt-free life. If you’d like to learn more about Dave Ramsey and getting out of debt, start by reading his book Total Money Makeover. You can pick it up at the library, like I did. After read that book, read Smart Money Smart Kids. He has several other books, all of which Steve has read, but I’ve only read the two mentioned here.
More than anything, I want to encourage you to open your eyes to how stressful it is to live in debt. Then, I want you to take action! Get out of debt, remain debt-free, and teach your kids all about it along the way. It’s the best gift you can give your kids. As Dave Ramsey would say, change your family tree.
I’ll leave you with a few good quotes from the book.
Money is finite. There is not an infinite supply.
I truly believe that more is caught than taught. That means what you do is so much more important than what you say.
The borrower is slave to the lender.
When I talk to teenagers, I tell them that if the newness of stuff is what funds theirs happiness, they are going to be a rat in a wheel for the rest of their lives.
Never let a child utter the words, “I will be happy when…”
…Personal finance is only 20 percent head knowledge; the other 80 percent is behavior.
Thank you for sticking with me today. Remember, getting out of debt is not easy, but it is possible.