Transcript
Intro
Stephan Shipe: Welcome back to the Scholar Wealth Podcast. This week, a family giving through a DAF wants to know if a private foundation makes more sense, especially with four adult children who all want a seat at the table. Then with markets showing volatility this year, a listener asks us to look at whether rental real estate is a smart way to get into alternatives or just trading one set of risks for another. Finally, Rachel Cruze, author, speaker and co-host of The Ramsey Show, joins us for a conversation on how financial values are shaped, passed down and sometimes lost between generations. We talk about the third generation wealth trap, the mistakes even well-intentioned parents make, and what she thinks parents should be doing right now. So let’s go ahead and get started with question number one.
Question 1 – DAF vs. Private Foundation: Which Makes More Sense for a Family With $200,000 in Annual Giving?
Stephan Shipe: We’ve been charitably inclined for a long time and currently give around $200,000 a year through a donor advised fund. Someone recently suggested we look at starting a private foundation instead. We also have four adult children who are all interested in being involved in our giving. Is that worth exploring? And what are the pros and cons?
So great question. One that comes up quite a bit, especially when your annual giving is consistent and larger than what I would assume is a DAF option. And what I mean by that is when you’re giving $200,000 a year, you can do some meaningful work in a big way to organizations. And it’s not to say that anything less than that is not meaningful, but writing a check for $200,000, especially to a local organization, could be game changing for everything they’re doing. Whereas writing a $5,000 check is beneficial, but that’s usually going to a larger pool of money that’s going to be used for some goal. Maybe they have some capital campaign that they’re running and they want to build a new building or provide some new support to the organization. And they’re going to raise a couple hundred thousand dollars or a million dollars for that capital campaign. You donating to it helps with that. What starts to change when you’re giving hundreds of thousands of dollars up toward millions of dollars is that you can lead a lot of these capital campaigns. So you could come in and say, I know we want to build this new building, it’s going to cost $500,000. We’ll put up the $200,000 if everyone else can put up the $300,000. So you start leading campaigns or being the sole funder of some of these organizations’ projects.
Where that changes from a foundation is with the DAF, you’re restricted in a lot of ways. It’s a great easy way to get a tax deduction and work through charitable giving. You put the money in the DAF, it’s being held by some sponsor, and then you instruct that sponsor to go send it to whatever organization that you want, whatever nonprofit out there. A foundation is completely different in that it is its own legal entity. You have complete control over it and you’re not restricted to only giving money to nonprofits. You can go and give to different types of individuals. You can give internationally, you can give to for-profit organizations. So it really opens up a lot of different options when it comes to what your foundation is going to do.
And especially with your kids being involved, you can start to bring everybody together to start making decisions of what is the goal of the foundation and what are the long-term goals of the foundation when maybe you’re not the one in charge and the kids are in charge. So you can start having roles for the kids. They could start fundraising to add to the foundation. There is a 5% distribution that’s going to be required there. How that plays into the $200,000, you would need quite a bit saved up there in the foundation to be able to hit that with the minimum 5%. But you could do more than that. So you could fund it with a few million dollars, and then spend the $200,000 out of it with the intent to either grow the foundation through investments, donations, or with some of your estate, which is typically how that’s done. So you start the foundation now, you build a structure so all the kids are involved in the governance of it and have a seat at the table. And then as time goes on, the foundation starts to build a reputation. The kids understand how the foundation works with your guidance. And then at a certain point, you can actually move your estate to the foundation, or a certain portion of it, to the foundation. So that way they can still maintain the same goals that they’ve been working toward throughout your life, even after.
So lots of good things to come with the foundation. The con to this is that it’s not nearly as easy as a DAF. A DAF is a piece of cake. You throw the money in, you’re done. The foundation has some other restrictions around what you can spend, what are the concerns, and there’s some added costs associated with it. So the administrative filings, investment oversight, there are some tax consequences that come into play. But at this level of $200,000, you likely have been seeing this brought up to you because you’re right on the cusp of that becoming a number that makes sense for you to have more control of where those dollars are going. And especially when you bring the kids in, you’re not restricted to saying, well, that’s a great idea, but unfortunately there’s not a nonprofit that already does that. Now you can say, that’s a great idea. We can write that check directly to an individual or an organization.
Question 2 – Is Rental Real Estate a Smart Entry Point Into Alternatives, or Just Trading One Set of Risks for Another?
Stephan Shipe: With the uncertainty I’m seeing in equity markets, oil prices, tariffs, and broader economic volatility, I’ve been thinking about diversifying into alternatives. Rental real estate seems like an accessible starting point, but I want to make sure I’m not just trading one set of risks for another. How should someone in their mid-40s with a solid portfolio think about which alternatives belong in their plan? And what are the things I should consider before buying investment property?
First thing we need to do is, the discussion of whether or not you should have alternatives in a portfolio is not a discussion that’s made as a reaction to markets. This needs to be something that’s structured ahead of time. Or now if you’re looking at it, that’s fine, but it needs to be strategic. You need to look at the whole allocation and say, what is the allocation that I could put toward alternative investments? Most of the time that falls somewhere between 10 to 20%, depending on the risk tolerance of the individual and what types of alternatives there are, which is what my next point is around this concept of alternatives. Alternatives is this massive bucket that’s essentially non-public stocks and bonds. Everything gets captured there. Real estate gets captured there. PE gets captured there. Oil wells get captured there. Everything that’s not a stock or a bond in the public markets gets thrown into this alternative bucket. And the problem with that is answering questions like this of, well, should I diversify into alternatives? The next question is, well, what alternatives are you talking about? Because there’s a big difference between you going and buying the house down the street versus you going and buying an oil well in Oklahoma, or buying into a venture capital firm that’s investing in startups in San Francisco. Huge difference in risk, huge difference in liquidity, and huge difference in what knowledge you have going into that situation.
So where do most people start is exactly what you’re talking about, they start off with some sort of real estate investment and typically residential real estate because that’s what we know, right? You bought a house, so it’s comfortable. You’re not having to go in and buy something that you’ve never seen before. You’re not doing any angel investing or startup investing. So we tend to invest in what we know when it comes to alternatives, which is not actually a bad idea because the alternative markets tend to be very opaque. What we want to try to do is to provide some sort of benefit to our investing returns by coming to the table with added knowledge over and above the rest of the competition. So in other words, if you’ve spent your entire career in the medical field and you want to go invest in a startup, you shouldn’t go invest in a technology startup that has nothing to do with medicine. Unless you had a ton of connections to technology or that area, you’re investing in an area you’re not familiar with. However, if there’s a startup medical device company, you’re going to have a lot more knowledge than I would on whether or not that’s actually going to work out. When it comes to real estate investing, residential real estate gives everyone a little bit of comfort because they can walk in and say, I know what a house is. I’ve gone through this process. I know the location and I know what a single family home looks like. So I already have a little bit of information about that that hopefully gives me an added return. So it’s not that it’s necessary to get into alternatives for everything, for diversification. It really depends on what type of alternative you’re getting into.
Now, when it comes to real estate, what’s interesting about real estate is there’s lots of benefits to real estate investment that can have outsized returns, especially because of the leverage aspect. So you take out a loan, you’re only putting 20, 30% down, and you’re creating the cash flow off of 100%. So you have this leveraged aspect to it. Of course, that brings its own risks. We saw this in the financial crisis as well, being over leveraged, but leverage is one way that you’re adding value to a real estate portfolio. The other is going to be your ability to take depreciation. So you can go in and depreciate some of those assets over time. One of the things we’ve talked about before and would absolutely have to be taken into account is that depreciation recapture if you ever go sell those properties. But without getting into the weeds there, depreciation is a benefit. Income is going to be a benefit. So all these things work out really well. The issue is it’s not as liquid as other types of investments that you can get in and out of.
But what you have to start thinking about is how much time you’re going to be putting into the investment. The biggest mistake that I see when it comes to real estate investing is someone says, well, I’m going to go buy a single family home that I know about. Maybe it’s in your neighborhood. Maybe it’s across town. Maybe it’s your old house that you’re selling to move into a new house and you’re going to keep it as a rental. Those are all the common ways people get into this, and they underestimate the amount of time that goes into actually managing a single home for them. So they have to hire contractors to come in, or they do what most people do and they start doing it themselves, which is not necessarily a bad thing, but you have to understand the trade off of the ROI of that time. So if you’re going in there and you’re the one painting the walls and fixing up the floors and all of these things, that’s fine. Your returns are going to be higher because you’re not having to pay the contractor, but you’re absolutely spending your time, which probably works out to minimum wage doing that. So that’s the trap you want to avoid.
Where real estate really starts to become a benefit, especially from a more passive income perspective, is when you start to build it as a business and not just a single investment. So for instance, if I’m having to go paint the walls of the one single family residence I own, that’s all my time going in. I’m having to buy the paint brushes and the rollers and the paint and spend my weekend doing that. If I own three or four properties, now I can buy the paint in bulk. All the houses are going to be painted the same color. All the houses get the same tile. Everything’s going to be consistent. And if I hire a painter, I’m going to get a better deal because I don’t need them to come in and paint one house. I’m telling them I need four houses painted. So you start to have some economies of scale in this scenario, and that starts to be acting more like a business. You also reduce the risk because if one renter leaves, not 100% of your income disappears, but only a quarter of your income disappears if you have four properties. So if that’s the path you’re going on, then that’s fine. That starts to look like you buying into a real estate business, not you being the landlord of a single family home. That’s the trap that a lot of people get into. And that’s where you hear the complaints of, I hate being a landlord, I always get phone calls, I do all this, because they’re seeing it as this is supposed to be a set it and forget it investment. And really, it is everything but a set it and forget it investment. You’re still going to have to be putting in the work. And you have to understand that’s part of getting that higher return.
When you start getting away from that direct ownership and you get into multifamily homes, REITs, all of these types of things, the further you get away from that single family ownership where you’re the one in there painting the walls, your returns are going to be less and less and they’re going to look more and more like the broader economy. That’s why REITs typically have a really high correlation to the S&P 500. You’re not in there painting the walls. You’re not in there fixing the toilets and dealing with the renters. So if you’re not doing any of that stuff, all of those benefits that you were getting from the depreciation and from having more information about one neighborhood versus another neighborhood are gone when you start investing in broader and broader portfolios. Are they more diversified? Yes. But that diversification lowers your risk, which also starts to lower your potential return on those investments.
So I don’t think it’s a bad idea, but that’s how I would start looking at this. I would look at alternatives from a strategic point of view, and that needs to be done ahead of time. See how much you should be allocating to alternatives, and then not just saying I have this chunk that’s going to alternatives, but saying I have X amount of dollars that can go to alternatives. What type of alternatives do I want to invest in? Break that up next, and then start to find them and take your time finding them. You don’t want to rush this. You want to diversify not only the types of alternative investments, but the vintage of those investments as well, to diversify that risk across the business cycle.
From the Field – How Financial Values Are Shaped, Passed Down, and Sometimes Lost Across Generations
In our From the Field segment, we explore how financial values are shaped across generations. We’re joined by Rachel Cruze, author, speaker, and co-host of The Ramsey Show. Rachel grew up watching her parents rebuild from financial hardship and go on to build one of the most recognizable personal finance platforms in the country. Now raising her own children and working daily with families across the country, she brings a rare multi-generational perspective on how financial values are shaped, passed down, and sometimes lost.
Stephan Shipe: Rachel, welcome to the Scholar Wealth Podcast. So to start off, give us a little bit of your background and how growing up in your household shaped the way you think about money today and how you handle that with your kids in this generation.
Rachel Cruze: For sure. Well, thanks for having me on. I appreciate it. So I was actually born the year my parents filed for bankruptcy. So there’s a little bit of a nuance of truly being born at the bottom. You could say I was born in April. My parents filed bankruptcy in September. And so out of that whole process is what created the financial principles at which my parents lived by and what we teach here at Ramsey Solutions now every day.
And it’s pretty wild because personal finance, you can get into all the degrees and know all the tactical, but there’s so much about just this common sense way of approaching a subject that can be really difficult. Money’s a hard subject. And even if you have a lot of it, right, you can start to see the complications that it possibly can cause in your life and how to navigate those. So yeah, growing up in that household, obviously at the beginning, I feel like it was like survival for my parents. And my early memories are shopping at consignment sales and garage sales. We never went on vacation. I just grew up with parents literally coming out of this financial disaster. But then as they started making money, I realized not a ton changed. There was still so much responsibility on us kids. We always were working. I always laugh. I’m like, we were never given an allowance. We were always on commission. So you work, you get paid. You don’t work, you don’t get paid.
So even from a young child, working was a part of our rhythm, whether it was chores around the house or even my dad was starting his business. And so we would sit in the living room and put labels on shipping packages because he was shipping out his first book as that was starting. And so that was always a constant in our home, as well as learning that when you earn money, you give first, you save second, you spend third, right? It’s like kind of these rhythms at which we learned. And then as we got older, mom and dad were good at bringing us into money conversations. We never had this legalistic seminar type family where it was like you had to sit down every Saturday and we’re going to talk about mutual funds or things like that. It really wasn’t like that. They really taught us about how to manage money through the ebb and flow of life. There was such a natural cadence to it. So it never felt intimidating or off-putting by any means. So much so to the point when I went to college and was talking to people my own age, realizing how much people had no clue about money. I mean, these 19, 20-year-olds, their parents never talked to them about the subject. And I just thought, oh my gosh, not that my parents were again legalistic or crazy about it, but they taught us everything. I mean, they taught us everything from taxes and mutual funds to contentment and generosity, the heart issues of money. And so for my story, when I graduated college, I realized that’s really what I wanted to do. I’d been speaking with my dad at some of his events through high school. But when I was, yeah, 21, 22 is when I came on full time and started speaking at high school assemblies and that kind of thing. And then that was 15 years ago. And so now getting to host some of our shows and continue to speak and write books and all of it about the subject of money has been phenomenal. But it is a hard one to navigate whether you are making $30,000 a year or $30 million. It’s positive and negative sides for sure.
The Third Generation Wealth Trap
Stephan Shipe: And that’s one area I wanted to dive into because you have a really unique experience of, as you said, being born at the bottom and going through this. And that is common for kind of the second generation. We see this happen in business and we see this happen in wealth, where the first generation, they’re scrappy. You’ve seen it. They’ve had to build it up. The second generation grows up watching that scrappiness and having to deal with the scrappiness. So they see the wealth built so they have a unique appreciation for wealth. And then there’s a real difficulty with the third generation, right? Because they don’t get the, I don’t know I’d call it the pleasure, but the advantage of kind of living through that at the beginning. So how do you navigate that now? Or how do you think about that with your own kids, kind of knowing and being aware of that, like they’re not going to see those same situations of mom and dad just filed for bankruptcy and we’re slapping labels on shipping containers. And now they’re in a different type of world. How do you kind of break that apart or how do you handle that?
Rachel Cruze: I wish I had like the magic answer because I’m literally in the thick of it. Our kids are, we have a 10-year-old girl, eight-year-old girl and six-year-old boy. So we are at the early stages of parenting in that sense. And it’s a conversation, honestly, my husband and I talk about a lot because the struggle isn’t necessarily there, like what you’re saying. So you kind of have to manufacture it for them. I mean, there is something about still this idea that money has limits, money has boundaries. And even though my husband and I’s money situation looks a lot different raising a six-year-old than my parents did, we still have to understand that. And so there’s so much about more is caught than taught, and I really do believe that. And so I think it first starts with Winston, my husband and I. What are we talking about? How are we interacting with money? What does this look like for us? And if money’s taken over our lives to the sense that it’s become this thing that we are so attached to, that it’s the answer to all, it’s this thing that we value, or what money can buy us, we value those things, when you start to shift into that world, the third gen is kind of screwed at that point because that’s all you see your parents modeling. And so Winston and I have to do a good job about actually asking the harder questions for our own lives of, what are we doing? What are we buying? What are we limiting to a point that we may not have to financially, but actually it’s probably a good practice for us to not just get everything we want, not just only for our kids, but for us. And so there’s so much about how Winston and I hold this subject that I think is big. And that’s going to be the loudest message our kids see.
But then also tactically with our kids, we’re kind of doing the same principles that I grew up with, a little bit of what I just shared earlier, but making them work and make money. What does it look like to be generous with some of that? You have to save some of it. And you have to spend some of it. I say constantly, because my kids, even raising kids in 2026 is so much different than the 80s of how I grew up. The consumption is there with Amazon, the internet. They just can see things and know that they can get it so quickly. So even creating some delayed gratification when they can spend with their own money, still manufacturing some of this slowness and patience is really big. And most of the time I’m like, no, we’re not buying that off Amazon. If you want to spend that, we’ll have to go to the store and we’re not going to go to the store, we’re not going to Target for another day or two. So you’re going to have to wait on that. Right. So it’s a lot of intentionality and we’re not perfect at it by any stretch of the imagination. But I do put a lot of stock, which may be right or wrong, I don’t know, we’ll see, probably 10 years when my kids go out on their own, on how Winston and I view money in our household and the way that we take care of it. I think that is going to be big for our kids.
Stephan Shipe: Yeah, no, I think the delayed gratification is a major factor. I know my wife and I joke about that regularly, like having to explain what a commercial is between shows as opposed to just choosing whatever show you want to watch at any given time. So that’s definitely a big one there. And do you see this, from the research you’ve done for books and the people you’re regularly around in this world, are there any mistakes that you see well-intentioned parents go down? And I know we have your hypothesis not fully been tested yet, but you see a lot of this, right? And you see it and you can look and say, you know, that’s already not turning out to be what they thought it was, even if they were well intentioned. Because I know even with my clients, a lot of the times it’s not that no one purposely goes out there and expects their kids to have all these issues with money or anything, but it’s usually found out later. It’s like, we shouldn’t have done that. And so are there any that you see commonly show up?
Rachel Cruze: Sure, sure. Yes. You know, yeah, one thing we hear a lot, and again it comes to your point, I love that setup of like, it comes from a good place, but the way it’s actually playing out is probably more harmful, is this statement of, I want my kids to have a better life than me. And what that usually equates to for most people is stuff. I want my kids to have more things. I want them to have a nicer car than what I had. If I didn’t have a car, I want them to have nicer trips. I want them to have nicer things. I want them to have a better life than I had. And I think we see all through the parenting space, right, when you talk to those people, your kids want you at the end of the day. That connection and that self-reliance on a parent is going to raise your kid in such a healthier way than when you say, I’m going to delegate their happiness to stuff.
Because when you do that, what you’re kind of saying out loud is to have a good life, you have to have nice things. And that’s false. Now, it is nice to have a car that’s not breaking down every week, right? Or it’s nice to go on a trip and stay at a nice hotel, right? Like, I get all of that. But there has to be so much more with our parenting and our intentionality with our kids on a deep connection level that I think is going to sustain them throughout them being under your roof than just I want them to have a better life so that’s going to equal nicer stuff. And so that is one thing we hear commonly.
And then another thing I hear also is that whether it’s big purchases, a car, or college, they think if I give them this, then that’s going to ruin them. I hear the cautionary tale on the other end of the spectrum. And I think there’s some good in letting your kids be part of big purchases. There’s nothing wrong with that. My kids will probably pay for half their cars. That’s what my parents did, and I love that idea. Whatever you save up, we’ll match. But my parents paid for my whole college. And we had to stay in state and go to a public university and graduate in four years. There were some parameters around it, but they did. And knock on wood, I’m like, I don’t think that ruined me. So I think this idea of if you just give your kids a really nice gift, like paying for their college, then all of a sudden they’re going to be ruined, you have built 18 years up at that point for your kids and how they’re going to view and see money and the gift that is given and how they’re going to handle that. That’s in their character already. One decision about paying for something isn’t going to make or break them. That was done way before.
So I think I’m looking at both ends of the spectrum. I just want to give them all this great stuff because that means I’m a good parent, I don’t think that’s true, or I think that’s false to an extreme. And then also, if I do have money and I want to help my kids, then they’re going to be entitled and they’re not going to be able to handle it. So I think both ends of those spectrums, there’s maybe some little nuggets of truth, but those overall blanket statements I think can be dangerous. You have to look at the nitty gritty of it.
Stephan Shipe: Yeah, I think the other one I throw in there for the third component of that is the one I hear regularly. Everyone looks back at the times that they were struggling, especially when they were building wealth, and they kind of like those times, right? You don’t like them in that moment. But 30 years later, they look back and be like, you know, we were driving the car that was breaking down. And they’re constantly telling that story. And they like knowing that they’ve kind of built that up. So it’s this, I think you nailed it. You almost manufactured the difficulties and the hardships as well to try to give them some of those experiences because I think there’s a need for some of those challenges to overcome as well. So I like the matching ideas and regularly talking about it, which is great. So how do you think that conversation is going to change then? If we have this, like you said, your first 18 years, you’re building up all of this and they’re watching you and how you handle money and your relationship with money and everything else. And how do you anticipate that conversation changing in the next 10 years, right? When they are in their twenties, when do you start expecting to bring up more of those money conversations? Do you have a trajectory in mind or just build it up as the purchases and decisions come.
Rachel Cruze: Yeah, I think there’s a little bit of life’s gonna happen and so navigating it as it comes. Yeah, a couple of things thematically that I hope my kids, they probably don’t understand at this age, but my hope is that they’ll really kind of embody this stuff in their 20s and 30s. I would say one thing, and again, we’re a family of faith and so spirituality is a big part of the way we view our money. And so there’s beauty in saying that you have a higher calling in your life, like all of this just isn’t about you. Because I think there is this idea that the finish line always moves. If you’re wanting this amount, if you get that amount, you’re going to want the next amount. And so there’s this discontentment that can happen with money really easily, even with really wealthy people. And so there’s something about having a bigger picture on your life, a bigger calling in your life if you will, that you are more of a manager, you’re not an owner.
And that perspective, I think, takes it off of you and actually starts to see the world and say, how can I actually use this money to better my life some? I don’t think, I mean, I think that’s great. But also, that there’s a responsibility here. Like, this is a big deal. If you are carrying generational wealth, that is not a lightweight to carry. That’s a really big responsibility. And so there’s that weight that I want my kids to feel. And I think that really does come when they’re looking beyond themselves. So that’s one. And they’re not going to get that at six years old, I know that. But it’s kind of the rhetoric at which we do talk about the things that we have that are really nice, that they are gifts. Like, yes, we work hard. But at the end of the day, we do believe in something bigger than us. And so that’s a shifting conversation.
And then also, I want them, my parents said this really well. I have an older sister and a younger brother. And we’ve all said the same thing. We’re all in our 30s and 40s. But we had to learn to live life on our own. There was no handing money down at 21, in our 20s especially. There was really no help, if you will. Now, I work at Ramsey, so there was a job, which was very nice. But there was no cash payday by any stretch of the imagination. And so when I got married and we had babies and all of that, we were figuring that out.
And there is a dignity piece that I want to give my kids for them to know, if crap hits the fan and we go through a great depression and everything’s gone, what if it just disappears? You’re going to be okay. Like, you’re going to be able to self-sustain. You’re going to have the work ethic to figure something out, and that you can do without, because you had to build this up gradually. Nothing just happened overnight. And so that gradual process gives them dignity to hold, to say that we can do this. And then kind of on the flip side, when you actually start, if you do choose to start giving money, whatever that looks like, I think there is a beauty to that. There’s a book called Die with Zero. And I love it. I mean, there’s a premise to that. I don’t agree with all of it. But some of it, I’m like, you know what, I think it is a good point that if you die at 80 years old and all your kids are in their 60s, they’ve already created a life. And they don’t really need your money. So where can you be helpful? Where can you extend, maybe financially, to help your kids and not harm them. That doesn’t create levels of entitlement, but actually magnifies the good character that they have because of all the work you’ve done in your household and through their early years of working and learning to live below their means.
And so those are thoughts that I do have kind of rattling around in my head because yeah, it is a, we always say at Ramsey, money’s a magnifying glass. It makes you more of what you already are. And so if you already have a tendency to want everything you want, and this stuff’s going to make me happy, or you have this consumeristic drive constantly, and you get money, that’s what’s going to be magnified. But if you’re someone who has practiced contentment, practicing contentment, I should say, I don’t think we’ve ever really arrived, but that’s part of it. There’s a generosity piece in you. There’s something bigger in your life than just money. Like, all of these things are big. That’s what’s going to be magnified. And so the character of the child is really, really important because they’re the ones that are going to be handling it.
Stephan Shipe: And that’s a long-term process, as you’re saying. I think it has to start early to have that built up because, you talk about this regularly, there’s going to be times where for tax purposes, estate purposes, large sums of money need to transfer, right? And you don’t want all of that to hit at one time. And you definitely don’t want it all to hit when someone is not ready for it. So it’s balancing those types of scenarios and doing the things that you’re talking about, which is a win. When do you actually need that money? And most people are inheriting at a time where they’re already retired. So they’re already set and they’ve had to do everything, but they probably could have really used help with the down payment or having the whole family take a big trip as opposed to them not being able to take those trips with their kids. So I can’t agree more on this idea of just working on that character early and building up those habits because ultimately you want to be at a spot where it doesn’t matter when they receive a significant amount of money because the character’s already there and you know it’s not going into any bad place for sure.
One Conversation Parents Should Be Having Right Now
Stephan Shipe: So as we wrap up, if you could think of one conversation that you think parents of means should be having with their kids right now if they haven’t already, what would be that advice? And you can pick whatever age that you want that to be for when they have it.
Rachel Cruze: Oh my goodness. Man, I’ll speak out of my own, my default, my negative, kind of why I said it earlier, because it is, I’m a natural spender. I am naturally, like experiences, have fun in the moment, my personality, I’m not great at details. Like I am definitely one that, my husband actually, we laugh, like I don’t know how he, he’s the saver. And I’m like, I’m the one that talks about money all day, but he has all the spreadsheets and loves all the nerdy stuff. And I’m way more of the free spirit.
So I see in my kids that they have different strengths already. You can see at 10, 8, and 6 how they handle money. It is wild because I do think who we are, our personalities and our tendencies, yes, come from experiences 100%. It’s that nature versus nurture. But I do think we’re wired in certain ways. So to answer your question, I think I would have different conversations with each of my kids because I can already see what they’re going to struggle with and what they’re not. Like my oldest, this literally happened at breakfast this morning, okay? I’ll give you a quick story. It’s book fair week at our school. So the kids always want it, but they always end up buying crap like pens and erasers. Like, it’s the book fair. Like you’re supposed to buy books at this thing, but it’s all these gadgets and toys. Last year they came home with all that stuff and I was so frustrated. I was like, you’re supposed to buy books at the book fair. You just bought toys. And so this year I was like, okay, I gave them each $30. And I said, you each can spend $30.
So I go back to get cash. Well, I literally only had a couple of 50s. That’s all I had. So I’m like, oh gosh. So I put them all in a plastic bag and I wrote $30 on the front. And I said, you guys, I’m giving you each $50. You do not have $50 to spend. Everyone repeat after me. You do not have $50. You have $30, which means you have to bring back $20. Not $19 and 16 cents. You have to bring back $20 or more because that is your limit, $30. Well, my oldest, my 10-year-old says, OK, Mom, I’m kind of nervous. I’m kind of nervous about this. I can already tell because she’s already cautious. She is a saver. I can see it in her. I really don’t probably have to worry too much. If anything, with her, I’m like, you need to spend. You need to open your hands a little bit with money because her natural tendency is just, oh my gosh, I don’t want to mess up. I want to be perfect at this. I’m like, girl, you’re going to mess up. It’s okay. Like just chill. Right? So that’s the oldest conversation. My middle was like, don’t worry mom. And I’m like, no, I’m worried. What about you? Because you’re me. You’re me and you’re going to see something or a friend is going to need more money. Don’t worry, my mom won’t care. You know, I can already see the conversation happening. And with her, I mean, I almost had to threaten her again. Like, Caroline, I know you and you’re going to get excited and you’re going to spend more than what we’re getting. You know your limit. I have to do that. And then the six-year-old, I mean, he’s probably honestly more like my sister. I don’t think he really, I mean, he’s in kindergarten. I don’t think he really is picking up a ton right now.
But those girls especially, I mean, I can tell who you are. So I think as a parent, leaning into the strengths and weaknesses of your kids’ personalities, where you know they’re probably going to struggle and where they may need some assistance and boundaries given. And then the other of how to celebrate the freedom, right? Again, my middle, she is just hands open, like me. I’m like, I’ll just give to anything. I am just, it’s great. Where I have to be a little bit more disciplined in some of my habits. Where my oldest is such a perfectionist, she’s scared to do anything, she just holds her money so tightly. And so she generally is not very fun with her money that she’s worked so hard for, and generally is not always as generous, right? And so learning to live with an open hand for her, so. Sorry, that’s a really long answer to that question, but I would gear, yeah, to the strengths and weaknesses of each kid, and it’s going to look different.
Stephan Shipe: Yeah, I think that’s great advice, tailoring it there as opposed to a one-size-fits-all approach. So that works great. Well, thank you, Rachel, so much for coming on to the Scholar Wealth Podcast today. Appreciate talking to you. It was great.
Rachel Cruze: Yeah, absolutely. Thanks for having me.
Outro
Stephan Shipe: And that’s our show. Thanks for listening and we’ll see you next week!
Disclaimer: The information provided in this podcast is for general informational and educational purposes only, and is not intended to constitute financial, investment, or other professional advice. The opinions expressed are those of the hosts and guests and do not necessarily reflect the views of any affiliated organizations. Investing in financial markets involves risk, including the potential loss of principal. Past performance is not indicative of future results. Before making any investment decisions, you should consult with a qualified financial advisor who can assess your individual financial situation, objectives, and risk tolerance.