5 Money Moves Dave Ramsey Thinks All Parents Need To Make
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Jennifer Taylor
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Rebekah Evans
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Parenting is filled with choices, including those related to money. It can be hard to know the best financial decisions to make for your family — but Dave Ramsey can help.
The personal finance expert has plenty of advice for parents, to help you make the most of your paycheck(s). Keep reading to learn five money moves Ramsey thinks all parents should make to give their family a bright financial future.
Get Out of Debt
Raising kids is expensive, so if you have debt, you’re not alone. As Baby Step Two of his Seven Baby Steps program, Ramsey advised using the debt snowball method to pay off all of your debt.
If you own a home, your mortgage is the exception to this rule. Hit pause on investing while working to pay off debt, so you can go at it full throttle.
Don’t Rush Into Buying a Home
As a parent, you might feel pressured into buying a family home, but Ramsey doesn’t believe in rushing into it.
“Renting is not a waste of money,” he said on Instagram. “It’s buying patience until you’re ready to buy a home.”
On paper, a mortgage paper might be less than rent, but he said you also need to think about the added costs of homeownership. Instead of moving too quickly and being “house poor,” he said it’s best to wait until the time is right.
Get Term Life Insurance
“If someone depends on you or your income, you need to get term life insurance in place as soon as possible,” Ramsey said on Instagram.
He advised getting coverage worth 10- to 12-times your annual income. As for stay-at-home parents, he recommended opting for a 15-to-20 year policy worth at least $250,000 to $400,000.
Do note, he only advised getting term life insurance — not whole life insurance. He noted that term life insurance offers affordable coverage, while whole life insurance is much more expensive.
Ramsey said whole life insurance isn’t worth it, because you can use the money you’re saving with term life insurance to pay off debt, save for emergencies and invest. This will allow you to have more in the long run.
Save for Retirement
As a parent, you’re probably used to putting your kids first, but there’s exceptions to this rule. When it comes to investing, parents shouldn’t invest for their kids if doing so means they have to stop saving for retirement, according to Ramsey Solutions.
Specifically, Ramsey believes you should invest 15% of your household income in retirement, according to Baby Step Four of his Seven Baby Steps program. This is important, because it can help ensure you don’t have financially rely on your children in retirement, according to Ramsey Solutions.
Consider Saving for Kids’ College
Helping your kids avoid student loan debt by putting aside money for college is one of the best things a parent can do, according to Ramsey Solutions. While taking this route is entirely optional, an Education Savings Account — or Coverdell Savings Account — or a 529 plan can serve as good investment vehicles.
Of course, different families have different situations, so there’s no one-size-fits-all option.
For example, in an episode of “Ramsey Everyday Millionaires,” Ramsey spoke with a caller who wanted to know what to do with the money he and his wife saved for his kids’ college tuition — in this case, it was $200,000, needed in seven years. Ramsey advised putting the money into good growth stock mutual funds.
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