Rachel Cruze is the daughter of respected financial author and radio host Dave Ramsey. An accomplished author and speaker in her own right, Cruze and her father just released "Smart Money Smart Kids," a book about raising financially responsible children.
Here are highlights from our interview with Cruze on raising financially smart kids.
What was it like growing up with financial guru Dave Ramsey as a father?
People ask me this a lot. You know, ‘what was it like growing up as Dave Ramsey's kid?' And I think some people assume we had, like, mutual fund parties and budget meetings all the time, and thankfully that was not the case at our house. But my parents were intentional at teaching us how to handle money. So from a young age, I learned money lessons, but they did it really through the ebb and flow of life, kind of in teachable moments.
We were never given an allowance growing up. We were always on commission. So the idea is you work, you get paid. If you don’t work, you don’t get paid. And I love that because it really made this work-money connection in our mind and laid a strong foundation for a work ethic for us now as adults.
How early can you start teaching kids about money?
You can start teaching kids as young as 3 years old about money. You can start, you know, having chores that’s associated with money. Things like when you’re cleaning their room or they’re cleaning their room. You know, they’re picking up a few toys. You’re picking up most of them, but to that 4-year-old, you instill in them and affirm them that, 'No, you are the room cleaner. You did the best work ever.'
Pay them instantly after they do a chore and, put that money in a little clear plastic jar that sits on their dresser in their room. And let that money pile up in that jar. Ten dollars can look like $2 million to a 4-year-old. And let that pile up, and take that money down to Target or Walmart or Toys ’R’ Us, and let them buy a toy with the money they’ve earned.
How do you tailor the lessons as kids get older?
When they become 6 to 13, that age range, their responsibility should increase. What we did in the Ramsey house is get a chore chart, put it on the refrigerator and... write the dollar amount and the days of the week they’re expected to do those chores and they can check it off. And have a one-night-a-week pay day night instead of paying instantly like the young kids. And so that way, they have to learn that you don't get money right when you complete something, you have to wait a little bit, a little paycheck, if you will. You have to wait to that 15th and the 30th.
And when they get to be teenagers, I tell parents, take the amount of money you'd normally spend on them and put that amount of money into a checking account with their name on it, so that they are in charge now of their money. So when school fees come up or if they want to go out to eat with friends or the movies, it all comes out of this little account, that they have this checking account and they have to be in charge of it. I would sit down with them and do a written budget with them. And show them, ‘hey, here are the areas of your life that you are going to spend money on this month.' And help them as a parent, you know, figure that out. Put dollar amounts next to each of those areas, and make sure that the income coming into that bank account -- your money plus if they have a part-time job -- minus the expenses that they plan on spending that month, equals zero. So every dollar has a name. And that’s the exact same way I teach a 14-year-old to do a budget or a 54-year-old to do a budget.