My sweet little beans are napping right now as I write this, and I’ve been thinking so much about them and the importance of teaching them about money lately.
Like, I’m just so gung ho intense about making sure these kids are extremely financially savvy.
I do not want them to make some of the same mistakes I did, and I want them to grow to be extremely wealthy – and generous.
It’s going to be a tough challenge though because I want my kids to have amazing life experiences. I want them to dress well. I want them to be able to do ballet and baseball and whatever they want.
However, I do not want them to be spoiled, and I want them to be extremely hard workers – something they should do by default after watching how hard their parents work.
So, what’s got me so intense lately? Well, it all started when the PR team at Dave Ramsey headquarters asked me if I wanted to review the book, Total Money Makeover. As of this year, they have sold a whopping 5 million copies of that book. I’d certainly heard about Dave Ramsey before, but I also knew a lot of personal finance bloggers don’t like him because Dave hates credit cards (and PF bloggers love credit card points.) Also, Dave encourages people to halt retirement savings to get out of debt (and PF bloggers usually go in favor of the math.)
So, because of all of those things, I was really on the fence. But I read the book and I got so incredibly inspired. I haven’t cut up all my credit cards yet or anything like that but I did list my debts from smallest to largest just to see where we were, and we did start working with Matt Becker as our financial planner to get a third opinion on how to tackle this debt and build wealth. I feel like we’re really getting our life in order, finally crossing some T’s and dotting some I’s.
I am very, very excited about the power of our income in the future and how we are going to make some huge headway in the next 10 years when it comes to our net worth (after we drag ourselves out of the half a million dollar negative net worth first.)
The Baby Steps
In The Total Money Makeover, Dave advises that everyone follow these steps in order as a way to build wealth:
1. Set up a $1,000 starter emergency fund
2. Use the Debt Snowball to pay off consumer debt
3. Save 3 to 6 months of expenses
4. Invest 15 percent for retirement
5. Save for kid’s college tuition
6. Pay off your home
7. Build wealth and give generously
I was originally thinking that $1,000 wasn’t nearly enough for an emergency fund but in the book, Dave says if it’s going to take you more than a few years to pay off the debt then you can add a little more to it, which made perfect sense to me.
There were a lot of things, in fact, that I heard over time about Dave through reading blogs and reading the financial news that I didn’t agree with. But then, once I read the book, there were a few caveats and further explanations by Dave that made it all really click. In fact, the reason the initial emergency fund he suggests is so low is all a part of it. It makes you a little bit more intense about paying off your debt because you don’t have a lot to fall back on. Interesting, right?
So, this all brings me back to the original point of the post, which is listing the three mistakes that I made that I will fight so hard to make sure my kids never make.
- I hope my kids never get into credit card debt.
- I hope my kids never buy a home or rent an apartment they can’t afford.
- I hope my kids never have to take out a single student loan.
We are going to do our best to work as hard as we can to do things like save and cash flow their college and teach them all about the crazy mistakes we made with apartment rentals and credit card debt. We’re also going to show them how to budget, how to not spend more than they earn, and in general, how to be intelligent, common sense people when it comes to money.
If you listen to Dave’s podcast, which I’ve been doing lately as I wash the dishes and clean up at night, you will be astounded at the questions that people call up and ask. The state of financial literacy in our country is extremely depressing, and I’m hell bent and determined that my kids won’t be part of that statistic.
I should also mention that there are no affiliate links in this post. There’s no benefit I get from mentioning Dave or his book or his podcast. They just sent me the book no strings attached and because I’ve always wanted to read it, I gave it a try. Then, the whole thing just sort of went from there and now I walk around with the Dave Ramsey show in my ears every day.
In fact, it’s now a big goal of mine to be the person who calls in to his show to say they paid off the highest amount of debt in the history of the show. I’ve been listening for a few weeks now, and so far the highest debt paid off I’ve heard is in the 360k range, so I think we have a chance!
What types of money mistakes have you made that you hope your kids or loved ones never make themselves?
39 responses to “I Hope My Kids Never Make These 3 Financial Mistakes”
I do hope that my daughter will be financially responsible when she grows up. She has already a savings account and I always told her to have a simple life.
I hope she is too! Keep telling her as she grows up and it’ll definitely improve the chances of her living that financially responsible life you want for her.
Great post, Cat!! I like Dave Ramsey and have flipped through a few of his books but have never read any in full. I do agree with most of his principles, though! Totally agree on what I want for my kids. I definitely do not want them to be spoiled but it’s so hard not to give them everything they ask for haha. It’s a fine line. I do find it easier to say “no” when two of them are asking for things. If I only had one, that child would be spoiled rotten haha.
Hope you have a great day!!
It can be super hard to say no. But I always try to remember that telling them no now will help them be better at practicing delayed gratification on their own when they are older.
I’ve never read his books but I really appreciate how Dave Ramsey takes human psychology into account with his advice. Debt snowball might not be mathematically optimal but it’s really effective and that’s what matters.
I hope to instill in our kids the same lessons – debt of all kinds can be a big anchor. While it makes sense in some cases, like student loans, there’s little justification for credit card debt unless you’ve been in some kind of serious financial calamity. Pizza is not a serious financial calamity. 🙂
As a parent, I think just being aware of it now is 95% of the battle because kids will pick up on these things all on their own.
Pizza is not a serious financial calamity. – That made me laugh Jim, but you are 100% right. The debt snowball seems to work for a lot of people because so much of the battle to get out of debt is psychological, not mathematical.
What I want my kid to avoid is that they should not make hesitant decisions on financial matter. They should think twice and weigh pros and cons, so that they arrive at a sound decision.
Ramsey’s book was one of the first resources that inspired us to begin our get out of debt journey. I hope our three children never make any of the money mistakes we have made. We have involved them from the begin and are teaching them more than we ever knew at their age. Having a plan, staying out of debt and saving early are big teachable items for us.
That’s great Brian! Having them involved in your process will surely teach them something so they don’t end up in the same boat when they grow up. We always want our kids to be better off than we were, and part of that is in making better financial decisions.
YES!!! I hope the same for my children. Those three things alone will set them up for success. Not to mention having a family who is supportive and teaches them about money. 🙂
Yes! Have a supportive family that takes the time to talk and teach kids about money is very important.
This is a great list! I think that I need to start developing similar goals for my kids. I definitely don’t want them taking out student loans since I’ve seen how poorly that has impacted a lot of friends.
Students loans are usually seen as a “good debt” and they can be, but they still have to be paid off eventually and they can really hurt people in the meantime.
I definitely don’t want my kids (if I ever have them) to take on consumer debt or buy a home they can’t afford. I don’t know how the student loans will work out. I’d definitely rather have them go to community college and look for scholarships and help out where I can, but I guess we’ll see what happens when we get there.
That’s a good way to look at it. You can have goals for them, but things might change in the meantime.
I think is never to soon to try to teach to kids how manage money, they are more smart than we thought…but I understand you at 100%, sometimes also adults do this kind of mistake!!!
Dave’s radio show is what first motivated us to get serious with our personal finances and was a springboard for getting us into blogging. I think he has a lot of solid points and throws in a lot of tips about leadership and entrepreneurship. I must admit I have stopped listening to him so often. I was obsessed for months, but then it gets redundant because he is teaching to a mass audience who generally are coming in not knowing anything about personal finance.
Another thing is he advises strongly against the public service loan forgiveness program and I frankly disagree. He makes a blanket statement about it, but there is a subset of people who could greatly benefit from it and you can tell he hasn’t done any research on it.
I was surprised to find myself agreeing with him more than I thought I would, but there will always be things you don’t agree about no matter which financial expert is giving the advice.
That sounds like a real good book! I want to have that “Financial Makeover”, too. Having debts is like being imprisoned or chained. It takes away our freedom- freedom to sleep, rest, and relax.
I agree those 3 choices can have a huge impact financially. We are starting to pay our son a little bit for chores and allow him to make choices about giving, saving, and spending his money, a la Ramsey. It’s more effort on our part to stay organized with it, but I know he’ll learn so much about money this way.
It does take more time and effort to teach your kids about money. Hopefully it will pay off in the long run though.
He’s right about slowly building up an emergency fund. Ours isn’t where we want it, but we’re having to save for a big impending bill. So rather than divert big amounts of money from that, I’m shunting $50 a month toward it. It’s slow progress, but it *is* progress.
As for the kids, I think they take cues from their parents. They’ll take in the values you have, and they’ll be shocked when their friends are overspending. At least, that’s what happened when I was growing up. In high school, my coworkers went into the mall to get lunch and sometimes a CD (which was about 3 hours’ worth of work) while I ate a brown bag lunch. I was mystified.
I really hope good values rub off on kids. We try to make good decisions and hopefully they’ll remember that when they’re older.
While I disagree with some of the things Dave Ramsey says, I think he provides solid advice for people who are facing a lot of debt. My hubby and I made the decision to pay off our student debt by tackling the highest interest rates first, but we’ve been snowballing the payments when we make a payoff. I’m sure your kiddos will grow to be financially savvy thanks to your good examples.
Aww! Thanks Jessica. 🙂 I’m glad you and your hubby are doing what works for you, but also snowballing the payments to help speed up the progress.
I can’t imagine your twins NOT being financially savvy with you as their momma! I have faith they’ll take after both of you with their work ethic, too. My parents definitely made their fair share of mistakes with debt, but I was able to learn from them, which I’m very grateful for. I mostly tell my younger cousins to work hard and avoid consumer debt. I was so, so proud to learn one cousin saved thousands in the bank as he’s going to need a new car soon.
I think Dave Ramsey has got all the basics down, which is what 99% of the public need. Build an emergency fund, track your spending, pay down your debt, invest. I think he advice to stay away from credit cards is smart for 99% of the population too, not everyone has the discipline to pay them off every month.
I think the one financial mistake I hope my kids don’t make is to borrow to the max for school. I did that, and I regretted it.
I love reading posts like these. It’s inspiring to see parents so passionate about instilling financial literacy in their kids at such a young age! Plus, it’s great to see you leading by example. It’s pretty hard to imagine your twins not being super hard workers! 🙂
I’d want my (imaginary) kids to realistically estimate how long it will take to pay something back when they borrow money, because I think there are times it can be worth it (it doesn’t make sense to almost finish up school and then drop out of 5 or 10 grand – as long as you have a good understanding of how you’ll pay it back). Those are some great lessons for the beans though! They’re lucky to have parents like you guys.
I think the Beans will be just fine-they have great role models! I really love Dave Ramsey’s book and while I wish he would learn to meditate and chill out a little bit-he is 100% on point regarding debt.
Yeah I’m pretty sure your kids are going to be just fine on all three of those things, based on how financially savvy you are! I’m not sure I agree with this, though -> “Also, Dave encourages people to halt retirement savings to get out of debt (and PF bloggers usually go in favor of the math.)” When I first shared a post on my blog stating that it was better to invest than to pay off low-interest debt, I received 47 negative comments from bloggers disagreeing with me and 3 that agreed with me. It seems to me that a very high majority of bloggers do NOT go in favor of the math. About a year later I wrote a post that mathematically showed (spreadsheet included!) how much it “costs” you to pay down low-interest debt instead of investing, and only then did almost everyone (begrudgingly) agree with me. Even still most said “even though the math says you shouldn’t pay it down the psychological aspects of debt trump the math for me.” An interesting case study.
I agree to some point….We’re saving for our daughters post secondary (or whatever she does) but I will not compromise my retirement/goals for her post secondary education. Ideally she doesn’t need a loan (between what we save, she saves, and in a perfect world- bursaries/scholarships) but if she needed a loan I wouldn’t freak out. I can’t comment about the loan process in the US but it’s a very safe and regulated entity in canada and if she needed to use one- fine; but you better believe she’ll have it paid off ASAP. Again I’m hoping she won’t need one but I really don’t feel like it is the parents responsibility to front the entire bill for a choice they make…the should have a little skin in the game and if that’s a loan they pay off in a timely fashion so be it.
Great thoughts, Cat! I think many of us financial bloggers don’t want to see our kids or loved ones make the mistakes we see others make so often. I do my best to spread the word about the importance of saving, paying off debt, and getting spending habits under control.
We started our son’s college fund almost from the moment he was conceived (well, at least as soon as we found out we were expecting) and never missed a month of adding something to it. In the beginning when we had lots of baby expenses, it might have only been $25 but as salaries increased etc., we increased the amount we saved. We put him through college all the way through graduate school without him incurring student loans. He helped by getting scholarships, grants, working summers and getting accelerated credit for courses so it definitely was a team effort. But don’t let people tell you it can’t be done, because we are living examples that it can.
I know you and the hubs are great financial role models to the Beans. I hope the same for my daughters. I want Lauren and Taylor to feel financially confident and to be able to make decisions that align with their values. To know that budgets don’t mean restriction but freedom. To recognize their life is the culmination of their every day decisions, so they are aware how their choices create their life and are grateful for all the blessings they have. Our girls have a very good life but I don’t want them to be entitled either. The state of financial literacy in this world is sad but thanks to people like you – we can help improve it. And it starts in our own homes with our children.
Like you’ve said, he gets a bad rap in the PF community, but I can’t really speak to that. I have not read Dave Ramsey’s book or taken his classes.
However, what you’ve said about how he fields calls from people calling in with questions, now that is awesome. There are so many people who simply don’t know the basics. Boosting financial literacy is a big deal, and it takes all of us to spread the word that debt is not an answer. So, regardless of how you feel about all his financial advice, you can’t deny that he gets a lot of people to pay attention to personal finance that otherwise would not.
Setting a good example to kids is what I and my husband do so that indirectly they know how to avoid such financial mistakes. So I think environment is really a factor in whether kids grow up with right skills in making wise decisions with regard to finances.
Thanks for this article Cat. I’ve stayed away from Dave Ramsey because I don’t identify as a Christian and I know his teachings are religious based and I definitely do love my credit card points. But being debt free has become big for me these days and maybe I don’t need to be as gung-ho about saving since I have a decent chunk of money put aside. And I totally agree. I don’t want my children to have to worry about student loans either because I have them and it’s a big burden to graduate with.
I hope my future children never take out student loans either. I think it will be interesting to see what happens with student loans and college enrollment rates 20 years from now. My parents, and my friends’ parents, went to college when it was still affordable and they didn’t know much about student loans. My parents advised me to take out student loans because they saw college as the only way to avoid working in retail forever, and they truly believed that the debt would be worth it. I definitely will not be teaching my kids those things. My generation knows how awful student loan debt is, so by the time we have kids who are college-age, I think college students may start making some very different decisions regarding debt.