My Exploration

To better understand these differing viewpoints, I delved into two influential books: "Smart Kids Smart Money" by Dave Ramsey and "Rich Kid Smart Kid" by Robert Kiyosaki. I aimed to compare their insights side by side to discern which philosophy resonated more with me. Both authors provide valuable guidance on equipping children to navigate today’s complex financial landscape.

Staying Debt-Free

Dave Ramsey is an avowed opponent of debt. His teachings emphasize the importance of remaining debt-free, with the exception of a primary residence. Together with his daughter, Rachel Cruze, he presents strategies for teaching children to manage their finances using a system of envelopes dedicated to giving, saving, and spending. By instilling these habits early on, children can gain control over their household budgets. Teaching them the value of hard work and resourcefulness can pave the way for financial wisdom.

Becoming a Capitalist

In contrast, Robert Kiyosaki embraces the concept of "good debt." His philosophy likens financial success to playing a real-life version of Monopoly, where leveraging debt, understanding taxes, investing in real estate, and entrepreneurship can yield impressive returns. Kiyosaki argues that we have transitioned from the industrial age to the information age, necessitating lifelong learning to adapt and thrive.

My Insights on Debt-Free Living vs. Capitalism

Having lived according to Dave Ramsey’s principles for 20 years, I diligently saved money while serving in the military and receiving promotions. Despite our efforts, my family and I often found ourselves financially strained. Although we could cover our bills, we lacked the surplus for savings, investments, or leisure activities. The crux of the issue was our limited understanding of financial management. Even adhering to Ramsey’s approach wouldn’t have equipped us with the knowledge to leverage assets effectively.

In 2019, my perspective began to shift when I discovered the concepts of passive income and dividends. This newfound knowledge prompted me to read "I Will Teach You to Be Rich" and "Rich Dad Poor Dad," which sparked a transformation in my mindset towards capitalism. Subsequent readings of Kiyosaki's "Rich Dad's Cashflow Quadrant" and "Rich Dad's Guide to Investing" were pivotal in my journey to becoming a capitalist.

Over the following four years, I embraced the capitalist model, acquiring skills in property management, trading options, dividend investing, purchasing bonds, and launching a business. My life dramatically improved as I learned to navigate capital markets, allowing my wife and me to retire at ages 39 and 42, living off our passive income. Our earnings continue to grow as our assets generate more revenue—a far cry from the traditional job with meager annual raises.

The Importance of Debt-Free Living

Two primary strategies can lead to wealth: reducing expenses and enhancing income. While Dave Ramsey’s teachings remain crucial for achieving financial stability, the ability to manage money is fundamental to household success. Tracking every dollar entering and leaving your home is essential for effective financial management.

However, a limitation of Ramsey’s philosophy is its assumption that families will only focus on their financial health once their children reach adulthood. Kiyosaki’s approach, on the other hand, encourages ongoing support for children throughout their lives. Understanding capital markets can empower parents to assist their children in achieving financial success.

Reflecting on my own experience, I left home at 18 without any financial guidance from my parents, which made my journey to independence challenging. I want to provide my children with the knowledge I lacked, as simply advising them to "get a job" is not a comprehensive solution. While hard work is essential, it’s equally important to focus on building assets. The prospect of my teenager saving $50,000 for a down payment on a house seems daunting. Conversely, refinancing one of our rental properties to access that amount is a more viable option—an approach that would likely be frowned upon by Ramsey but embraced by Kiyosaki.

Starting with Dave Ramsey

Dave Ramsey’s straightforward message resonates with many, as he addresses the financial challenges most individuals face. He doesn’t delve into complex strategies for acquiring multiple properties or creating a dividend portfolio, recognizing that only a small percentage of people will reach those stages. Kiyosaki, on the other hand, provides tools for wealth-building, although only a small fraction of the population may achieve significant financial success.

The good news is that we can integrate both philosophies to raise financially literate children. Dave Ramsey’s principles serve as a solid foundation for early financial education.

Conclusion

Once children grasp the basics of budgeting and household management, they can transition into capitalist thinking. Kiyosaki's assertion that "there are no risky investments, only risky investors" underscores the need for measured risk-taking to attain wealth. While Ramsey’s approach emphasizes safety, it often requires time spent in traditional employment to generate income.

For example, if a child needs to earn $5,000 monthly, they could work 160 hours at $32 an hour or develop a diversified income portfolio comprising dividends, car rentals, and room rentals. The latter scenario grants them the invaluable resource of time—hence my preference for Kiyosaki’s teachings, which prioritize time above all else.

Ultimately, both approaches hold value for our children. They must learn the fundamentals of budgeting, giving, saving, and investing. However, to truly excel, they will need to adopt a capitalist mindset. As inflation diminishes the purchasing power of our money, the ability to create wealth becomes increasingly essential. Best of luck on this journey!

Disclaimer: I am not a financial advisor. The information provided here is intended for guidance and should not be construed as direct investment advice. I am an Amazon Affiliate. Always conduct thorough research before making investment decisions. This article reflects my personal views and is not sponsored by any entities mentioned herein. All Rights Reserved Military Family Investing.