Name: Smart Money Smart Kids
Rating: 4.1 (184 reviews)
Author: Dave Ramsey & Rachel Cruze

What’s in it for me? Learn to raise financially savvy children.

Have you ever filed for personal bankruptcy? If you haven’t, good for you! If you have, you’re in good company. Dave Ramsey, the personal finance expert, once filed for bankruptcy with his wife. At the time, they were both twenty-eight and had two children – a toddler and a newborn.

But Ramsey and his wife knuckled down, put in some hard work, and managed to not only thrive, but to raise children who have also become independently wealthy themselves.

Who better to learn from how to raise money-smart kids than Dave Ramsey himself, and his daughter, Rachel Cruze?

Together, they cover both prevention and redemption in terms of getting out of debt. Their book, Smart Money Smart Kids, shows parents how to instill good money mindsets and habits in their children. Because you want the best for your kids, but you won’t be there their entire lives. And a key aspect of setting them up for a successful life is showing them how to cultivate a healthy relationship with money.

In this Blink, we’ll cover the basics of how to teach kids about the concepts of work, spending, and saving. You’ll find tips for dealing with toddlers through teens. You’ll learn how and when to introduce budgeting to your kids, and you’ll gain some key insights into paying for college.

We all know kids grow up way too quickly, so let’s get to it!

The basics – work, spending, and saving

Did anyone ever teach you that working leads to earning money? Many of us just sort of picked up that knowledge along the way.

But this is one of the most basic concepts you need to teach your kids – the connection between work and making money. This is something you can start young, but you’ll need to adjust the lessons as your child grows up. Instead of giving them an allowance, Ramsey and Cruze suggest a commission format for this lesson. An allowance doesn’t directly teach the connection between hard work and earning money like the idea of a commission does. Ramsey used this very idea with his own kids, including Cruze.

When your kid is about three, you can start making the connection by giving them options to earn a few dollars for some key chores. From about age three to five, your kid will need some simple chores, things like putting toys away in their baskets, making their bed, or carrying in lighter items from grocery trips.

Pay them immediately upon completion of the chore to really build the connection between work and earning. Use a big, clear jar to store their money, and pay them in single dollar bills. This introduces a fun element for young learners. Plus, using single bills helps fill the jar quickly, making it look impressive. This helps get kids excited about the concept of work and earning!

As your child grows older, you can increase the difficulty of the chores and introduce the envelope system. Use one envelope for saving, one for spending, and one for giving or charity.

It’s important to teach your kids wise spending and saving habits both. For younger children, start with spending habits. This is the most fun for younger kids, and we don’t want to bore or overwhelm them right at the start of their smart money journey!

Smart spending habits include things like looking for deals or bargains, waiting at least overnight before deciding whether to purchase something, and the opportunity cost of spending.

Need a refresher on that last one? No worries! It’s the idea that when you spend money on a toy this week, you won’t have that money to spend on the new game you want that comes out next week. Obviously, this lesson is easier for slightly older kids as opposed to your three-year-old!

As your child grows older, start introducing wise saving habits as well. Explain things like saving for bigger purchases. If a younger child spends money on candy every week, they won’t be able to save up for buying something bigger, like a new doll. You know your child best, so use examples that apply to them! These early lessons will then apply as they get older and start saving for bigger purchases like a car or college or a house. Be sure to revisit every lesson as they get older, because these concepts need repetition and applicable examples to really stick.

As you teach your child saving and spending habits, keep in mind that most people are either natural savers or spenders. Neither is better than the other, but it’s smart to be aware of our own personal inclinations and to adhere to wise habits either way. Cruze admits she’s more of a natural spender, but that by being smart about her spending habits and implementing other smart money habits like budgeting – we’ll get to that later! – she’s been able to live debt-free and thrive anyway. Your child’s spender or saver inclination might be different from yours, and that’s okay!

A CNN report about college students at University of Illinois at Urbana Champaign showed that nearly all those who demonstrated good financial skills reported that they’d picked up the habits based on their parents’ guidance when they were younger. So get your kids in the habit of saving and spending wisely now. They’ll take these skills with them throughout life.

Budgeting

So, we’ve covered some basics: the work-money connection, and wise spender versus saver habits. Now it’s time to delve into another term you might hear bandied about every time personal finance comes up – the budget.

You’re probably quite familiar with the term, but just so we’re on the same page, let’s define it. A budget is a careful plan and accounting of all the money you handle during a given time period, often a month. That includes income, money spent, money saved, money gifted, taxes paid, and so on.

College

Does the thought of trying to pay for your child’s college cause you to break out in a sweat? You’re not alone. Often, one of the biggest financial stresses for parents is how to pay for their kids’ college tuition.

Before we dive into some methods for covering that hefty bill, Ramsey and Cruze have a key message for parents – you aren’t responsible for paying for your children’s college.

Final Summary

Money is an important part of everyone’s lives – it’s neither good nor bad, but rather depends on the person using it. Teaching your child to be smart about money isn’t an easy endeavor. Heck, raising a child at all isn’t easy! But with the tips you’ve learned in this Blink, you’re well on your way to helping your kid become financially savvy.

You’ve now got a solid foundation for starting and adapting the conversation about money with your kids. Remember, these are big, important topics. Be patient and persistent. Walk the walk. Start the lessons simply and adapt to your child’s age.

Über den Autor

Dave Ramsey and his daughter Rachel Cruze are experts in the field of building and maintaining personal financial success. Ramsey helps people get out of debt while Cruze helps people stay out of debt in the first place. Ramsey’s other books include Financial Peace and The Total Money Makeover. Cruze’s other books include Love Your Life Not Theirs and Know Yourself Know Your Money.