We all want to raise children who understand how to give, save, and invest; however, this is more challenging than it sounds.
The world wants our children to become horrible money managers; many entities (banks, companies, lenders) can take advantage of adults with no financial intelligence.
As we raise our kids, there are two predominant ways we can view their financial acumen: by staying debt-free or becoming capitalists.
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Interestingly, two of the leading financial experts in the media, Dave Ramsey (debt-free) and Robert Kiyosaki (capitalist), have very different approaches to becoming financially independent.
My experiment. To see the difference between these competing and complementary lifestyles, I read two books: “Smart Kids Smart Money” by Dave Ramsey and “Rich Kid Smart Kid” by Robert Kiyosaki.
I wanted to see both sets of advice side by side and see which one I preferred. They both offer great takes on ensuring your kid can survive today’s fast-paced financial world. Let’s begin.
Staying debt-free. Dave Ramsey hates debt. In fact, his entire speaking platform preaches to remain debt-free except for your primary residence.
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Mr. Ramsey and his daughter, Rachel Cruze, explain how to teach your child how to use envelopes for giving, saving, and spending.
Eventually, your kid will utilize this early knowledge to control their household budget. If you can teach them early how to work hard and save their resources, they have a good chance of becoming financially savvy.
Becoming a capitalist. Robert Kiyosaki loves debt—good debt. In fact, his claim to fame is playing Monopoly in real life (with actual buildings).
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You can give your child an unfair advantage if you teach them to use leverage, debt, taxes, real estate, and business to make extraordinary returns.
Mr. Kiyosaki believes the industrial age is over, and we have entered the information. We must become lifelong learners in the information age to survive and thrive.
My perspective on staying debt-free or becoming a capitalist. I lived under Dave Ramsey’s lifestyle for 20 years. I worked hard and tried to save money.
I was in the military, so I kept getting promotions and earning more income. I didn’t read a Dave Ramsey book, but I was a high-earner. My wife also had a decent job.
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However, we kept falling behind no matter how much money we made. We could pay our bills, but we never had money left to save, invest, or entertain ourselves.
Here’s the rub: we didn’t understand anything about money. Even if we used Dave Ramsey’s method, we still wouldn’t learn how to use leverage and assets to get ahead.
In 2019, I learned about passive income and dividends. That knowledge started changing my mindset to that of a capitalist.
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The first two books I read were “I Will Teach You to Be Rich” and “Rich Dad Poor Dad.” Those both got my mind working in overdrive.
My following two books came from Robert Kiyosaki: “Rich Dad’s Cashflow Quadrant” and “Rich Dad’s Guide to Investing.” These books were life-changing, tentpole moments in my life.
I became a capitalist. Over the next four years, I became a capitalist. I learned how to manage tenants and properties, trade options, invest for dividends, buy bonds, and start a business.
You know what? My life is infinitely better now that I learned how to leverage capital markets. My wife and I are both retired (39 and 42), and we use our passive income to live our dreams.
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Even scarier is that our income will increase each year as our assets generate more revenue. I can’t imagine returning to a job and waiting for a yearly 3% cost of living raise.
Staying debt-free is still essential. There are two ways to become rich: lower expenses and increase income. Dave Ramsey’s methods are still the most critical part of becoming wealthy.
You can’t get rich if you can’t control your money. You need to track every penny that comes in and out of your household. Money management is perhaps the most crucial part of running a household and thriving in a marriage.
The only part I dislike about Dave Ramsey’s message is that it stops once people start investing in their retirement accounts.
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Simply staying debt-free is a recipe for long-term pain. Dave Rmasey’s plan works if your kids all become self-supporting, tax-paying citizens. It assumes you’ll only worry about yourself once your kids turn 25.
Robert Kiyosaki teaches us that we can help care for our kids for our lifetimes and beyond. If we understand capital markets, we can use our experience and resources to help our kids get ahead.
At age 18, I left the house and received no financial advice or support from my parents. I made it, but it was extremely difficult.
I don’t want my children to work hard like I did just because I don’t have the information to help them. Telling kids to “go work a job” and it’ll “solve all their problems” isn’t the answer.
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Hard work is always the key, but we must work hard to build assets. I can’t imagine how difficult it will be for my 17-year-old to get a high-paying job and save $50,000 for a house down payment.
It’s much easier to refinance one of my rental properties and take $50,000 out of it. These are techniques that Dave Ramsey would frown upon, and Robert Kiyosaki would love.
Start with Dave Ramsey. Dave Ramsey keeps his message simple because most people cannot even accomplish what he preaches.
He doesn’t teach how to buy multiple houses or build a dividend portfolio because most people will never reach these stages.
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Robert Kiyosaki gives us the tools to become rich, although only 3% of the population will become rich.
The good part is that we can leverage both techniques to raise financially sound kids. Dave Ramsey’s methods work really well early in life.
Conclusion. Once our kids have the basics of budgeting and running a household, they should graduate to becoming capitalists.
“There are no risky investments, only risky investors.” Robert Kiyosaki’s message is clear: learn how to take measured risks, and you will have a chance of becoming rich.
Dave Ramsey’s method is safe at the expense of time. You’ll have to spend your time working a job to create income.
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Let’s say our kid needs to earn $5,000 per month to survive. He can work 160 hours at $32 per hour. Or he could have a dividend portfolio ($2,000), car rentals ($2,000), and room rentals ($1,000).
In the second example, he has the most valuable resource on this Earth—time. That’s the main reason I gravitate towards Robert Kiyosaki—he values his time above all else.
In the end, both methods are valuable to our children. They must learn how to budget, give, save, and invest.
However, to truly get ahead, they will need to become capitalist. Our dollars become more worthless each year, so saving them becomes more burdensome. We must learn to create them from thin air. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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