Money is a topic that many people need help with but don’t like to talk about. Teens may not realize the irreversible impact they are making on their lives when they make bad financial decisions, such as going into debt or going to a more expensive college that they can’t afford. Rachel Cruze is here to talk to us about how to be financially responsible, specifically from a younger age. Her first book Smart Money Smart Kids, a collaboration with her father Dave Ramsey, is a New York Times Bestseller. After seeing her parents go through a bankruptcy, Rachel understood how important it was to be financially responsible. The entrepreneur, motivational speaker, and author is traveling around the country to speak to young adults about making good financial decisions early in life, as well as to their parents about how important it is that they learn this from a young age. Check out what Rachel has to say below:
1. Growing up watching your parents going through financial turmoil, you learned how to manage money at give generously at an early age. What are the biggest mistakes young people make financially and how they can fix it?
Student loans are the main issue for young adults. Too many people believe the lie that you can’t be a student without a student loan. That’s simply not true. It’s possible to go to school without student loans. It may mean giving up on going to your dream school and choosing an in-state school instead. You can also take advantage of scholarships, work-study programs and getting a part-time job. If you make sacrifices now, you’ll be set up for financial success later.
The other mistake I see is a lot of young people making is overspending. They often have unrealistic expectations of what their lifestyle should look like, which causes them to overspend and go into debt instead of being patient and saving for large purchases.
You have to be intentional when it comes to your money. Most college students don’t think about their finances until it’s too late. Make a plan for your money, also known as a budget. It doesn’t have to be complicated. Just list your income and then all of your expenses. If the total of your expenses is larger than your income, figure out how to cut back or how you can make some extra money.
In order to stick to your budget, you have to learn to say “no” if you don’t have the money to do something. If you’re intentional with your money now, you’ll be able to start your life after college in a much better financial position than most of your peers.
2. You speak a lot about giving generously, what advice do you have for young people who want to give back, but don’t have a lot to give?
Giving is about more than just money. We can also give our time and talents. Figure out something you’re passionate about and find an organization where there is a need. This may mean volunteering on the weekends or planning a fundraiser. There are so many opportunities and ways to give back, other than giving money.
3. For those Get It Girls who are working hard for their education or are thinking about going to grad school, what advice do you have for those who are considering student debt? What questions should they ask themselves before taking on more debt?
Student loans are a roadblock for younger generations. It is possible to go to school without a student loan, but it’s going to take work and sacrifice. If you’re currently using student loans to pay for school, figure out what steps to take in order to avoid going into any further debt.
The most important decision is choosing a school you can afford. That may mean looking at in-state schools or even a community college for a year or two. Then look at scholarships, grants, and even working through school. I know this doesn’t sound like much fun now, but you will be thankful when you graduate without debt.
For those who have already taken on debt, make a plan to pay it off! Pick up an extra job or two, and make sacrifices with your income so you can get rid of your student loans. Your largest wealth building tool is your income, so you don’t want it tied up in monthly payments!
4. Your book, Smart Money Smart Kids, you co-authored with your dad is a best seller! What is the number one piece of advice you give to parents when teaching their children about finances?
The number one piece of advice I give parents is to be intentional. You have to teach your kids how to win with money or someone else, like the credit card companies, will teach them for you.
There are four main areas I tell parents to address: working, saving, spending, and giving. Work is how money is made. Kids need to make the connection between work and money. This is why you should pay a “commission” instead of an “allowance.” Life doesn’t make allowances, so why should parents? Many adults still don’t make this connection, so make sure your kids do!
Saving money not only teaches kids patience, it also helps them set goals by saving up for large purchases. Spending some of their hard-earned money along the way is just as important. Kids need to have a little fun with the money they earn. Just make sure to guide them in making wise buying decisions. Start the habit of giving early. It’s the most fun you can have with money!
5. How do you juggle your personal life and business?
In the fall and spring, I have a really busy schedule traveling and speaking. So, on the weeks where I don’t have to travel, I make sure to balance my time between work and family.
6. When did you realize that financial advice was something you were passionate about and when did you realize you wanted to turn it into a business?
Since I was 15, I’ve traveled around the country with my dad speaking at his live events and hearing him teach people common sense principles for handling money. Too often I heard people say they wish they knew this stuff when they were younger. I realized that there was, and still is, a lack of knowledge in younger generations when it comes to personal finance. Too many people make bad financial decisions as teenagers and young adults that affect the rest of their lives. Now I travel around the country speaking to them about how money works, and to their parents about the importance of teaching these lessons.
Photography by: Courtesy of Ramsey Solutions