3 Things My Dad Taught Me About Debt

It’s my pleasure to host Rachel Cruze today at MegMeekerMD.com. Rachel is the daughter of bestselling author and financial expert Dave Ramsey. She brings a unique perspective to talking to kids and teens about money. We hope to bring you more financially-oriented posts from Rachel in the future. —Meg

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Guest Post by Rachel Cruze

Last time I guest-posted on Dr. Meeker’s blog, I wrote about how to teach your kids about money at an early age. But what if your kids are older, and what if college is right around the corner?

I was blessed to have parents who talked with me about the dangers of credit cards and student loans—these are issues that are very, very real for 18-year-olds entering college.

Today, I thought I’d share some of the principles my parents taught me:

1. Stay away from credit cards.

Nothing good comes from credit cards. You’re charged ridiculous interest rates to spend money you don’t have, and if you breathe the wrong way, the credit card companies will nail you with all kinds of penalties and fees.

Debit cards are always a better idea, because they are connected to your bank account, which means you’re using actual money, not a promise to pay later. Better yet, using cash instead of plastic will make you spend less. When it came to credit cards, my dad always told me, “If you play with snakes, you’ll get bitten.” The best way to avoid financial drama is to stay away from credit cards.

2. You CAN be a student without a loan.

A lot of people consider student loans to be “good” debt. That’s just not true. The average student loan debt for an undergrad degree is now more than $25,000. That means a 22-year-old, just getting his first taste of the real world, will be starting his career in a load of debt.

Instead of loans, take a part-time job during school, work full-time during the summers, and apply for every scholarship and grant you can. Also, be willing to go to a community college for a year or two, work and save money, then transfer out to a state school later.

3. Make a plan with your money.

You guessed it—budgeting. But, honestly, budgeting gets a bad rap. For a college student, it’s really easy. You’re not making that much money, and you don’t have many bills, so is it really that difficult?

All a budget does is tell your money where to go so you don’t wind up wondering where it went. You sit down and make a plan before each month begins. Break up your spending into categories—food, entertainment, gas, rent, etc. Give every dollar a name.

The key to teaching your kids about money is to connect with them before they head off to college and into the real world. If you don’t help them understand how to win with money, our culture will do the job for you. And you don’t want that.

Growing up as Dave Ramsey‘s kid, Rachel Cruze learned the basic principles of money at an early age. She travels across the country teaching those same principles, in a personal and passionate message of money and hope, to teens and young adults. To find out more about Rachel, visit daveramsey.com/speakers or follow her on Twitter at @RachelCruze.