Dave Ramsey is a money management expert, national radio personality and author of the New York Times best-sellers The Total Money Makeover, Financial Peace Revisited and More Than Enough. His nationally syndicated radio program, The Dave Ramsey Show, is heard by 4.5 million listeners each week on more than 450 radio stations throughout the United States.
Is it a good idea to include teenagers in budget meetings and financial talks?
—Paul via Twitter
Dave Says: I think it's a great idea, as long as it's not an extreme situation, such as you're extremely wealthy or you're looking at foreclosure. Teaching them about money with a standard, regular, monthly budget is one thing. But you don't want to put young people into situations they can't handle emotionally.
Walking through a typical, normal budget will show them how much money is coming in and how much things cost. They'll see on paper exactly how much the groceries or light bill costs. Then, when it's right there before their eyes, they'll begin to realize why mom and dad always tell them not to waste food and to turn off the lights when they leave a room.
This kind of thing is appropriate for high school kids and even younger children. As long as parents are having a discussion and making decisions—not fighting—it's good for kids to hear the give and take where handling money is concerned. Parents who never let their kids handle money, and never teach them the proper way to manage money, run a high risk of sending financially irresponsible adults out into the world!
Credit card insurance is a gimmick
I've got my $1,000 emergency fund in place, and I'm working toward paying off my debt. I was wondering what you think about credit card insurance offered through the card companies? It doesn't sound like a bad deal if they'll make the minimum payment for you if you become disabled or unemployed.
—Terri in Dallas, Texas
Dave Says: Credit card insurance is just another gimmick, so I think I'd pass on that if I were you. I don't buy gimmicks. Here's the deal. You should already have long-term disability insurance through your employer. If you don't, then you need to get it today. That way you're already covered and can make the payments if you happen to become disabled somewhere down the road. Remember, you're also working your way out of debt and building your emergency fund. So in a sense, you're going to use your emergency fund as insurance against bad things happening while you knock out that debt, and beyond!
Get ready to celebrate
My husband and I are just about to finish fully funding our emergency fund. We'll also be very close to paying off our mortgage next year. Would it be OK to pay off the house instead of bumping our retirement saving back up to 15 percent? We make about $150,000 a year and could have the house paid off by October.
—Sarah in Spokane, Wash.
Dave Says: Definitely! If you're that close to paying off your home and becoming debt-free, I say go for it. I get this kind of question a lot. Now, if you were a few years away from paying off your home, I'd tell you to continue following my Baby Steps program and begin pushing money into retirement right now. Even if you did this, you'd still get your house paid off really fast. But in your case, paying the house off next year is kind of like a really big car payment. Just knock this thing out, jump back into funding your retirement, and then celebrate, kiddo. You'll be completely debt-free!