The Ramsey Show - App - HELOC vs. a New House/Mortgage (Hour 3)

Episode Date: February 8, 2023

Dave Ramsey & George Kamel answer your questions and discuss:   "Should we empty savings to pay off the house?" Home improvement loan vs. new mortgage, "Does a backdoor Roth IRA make sense for me?" from the blog: The SECURE 2.0 Act: Everything You Need to Know  Saving for a house vs. focusing on investing. Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Live from the headquarters of Ramsey Solutions, broadcasting from the pods moving and storage studios, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. George Campbell Ramsey Personality is my co-host today. Open phones at 888-825-5225. Annie in Spokane, Washington starts this hour. Hi, Annie. Welcome to The Ramsey Show.

Hi. Thank you so much for taking my call. Sure. What's up? Yeah, so my husband and I have a slight disagreement, and the question is, should we pay our mortgage off and empty our savings account or keep a loan for about $150,000 and then do a few home improvements, and that would be a new foundation, windows, and HVAC system? Okay, so how much is in savings? Right now we have $608,000 in savings.

Okay, and the balance on your mortgage is what? $600,000. Okay, you said $608,000? Correct. It would leave us about a month and a half to two months' worth of emergency fund if we pay off our mortgage. You have an emergency fund in addition to the $608,000? No.

The $8,000 is a month and a half. I got you. Okay. Correct. Yeah. And your household income is what? At $203,000, approximately about $203,000. And then also we do have, we're just signing a 10-year lease for some farm ground, and that will bring in $30,000 a year for 10 years. Okay, so you have a quarter million dollar income. And we do not tell people to pay off debt and leave less than three months of expenses okay so let's fast forward

from today a couple of months and now you've got six hundred and thirty thousand okay uh that day i would pay off my mortgage okay and then i'm going to use this fabulous income and the extra six thousand dollars a month to build up some little uh buckets of money to do these renovations that we want to do okay yep my husband uh he said that's what you'd say but well i'm fairly predictable i've said it over and over and over i say the same thing all the time so i mean you can yeah so here's the thing uh the other thing you can do it it'll help you with this annie to process it helps me when you actually put numbers to it and then you put uh how many months it's going to take me to do this so i'm going to go ahead and get like a bid on the heat and air i'm going to get a bid on the foundation i'm going to get a bid on what was the other thing windows windows okay yeah and then i'm going to say okay the first one of these we're going to do

is i'll make it up windows okay and the bid is thirty thousand dollars okay without a house payment and a quarter of a million dollar income then how quick do i have thirty thousand dollars in addition to my emergency fund oh just a couple months i mean got it yeah and then how quick do i have you know the i'll make it up twenty thousand dollars for the heat and air if that's the second one i don't care which one's first i'm'm making this up, okay? But my point is prioritize and put actual dollars to it, and then back into how many months. And what you're going to discover is probably by this time next year,

you've got a fully renovated paid-for house. Yeah, perfect, yeah. So we're really not discussing, oh, we're never going to get around to this. No, lay it out. Game plan it. Develop a detailed strategy. And then that, if I'm in your shoes, discussing oh we're never going to get around to this no lay it out yeah game plan it develop a detailed strategy and then that if i'm in your shoes because you're the one not wanting to pay it off you're the one wanting to do the renovations first and that's okay but if i'm you then having that game plan going it's going to be here in a minute anyway i can deal with that yeah it helps

me to release it yeah yeah we're talking about a month or two before you guys have, you know, 625 in that account, and now we can clear the mortgage payment, which frees up the mortgage payment on top of still having an emergency fund there. So it's not enough time to even argue about. Yeah, you're going to be there. And, you know, I would. You guys make a lot of money, and I would do the renovations, assuming you're not overbuilding the neighborhood with all that. But I'm guessing that you're probably going to spend well less than a hundred

thousand dollars on those three items. And it sounds like the house is probably north of a million in value. And so it's not a big deal and you make plenty of money to do all this. So really good job. Very, very good job. These are the good things to argue about. These are good arguments. Okay. It's like, oh, we have $600,000 in savings. Do we pay off the house? What an argument most people would like to have.

Listeners are shaking their fists right now going, really? This is what we're calling in about? $600,000 in the bank. Amazing job. Truly first world problems. But yeah. Yeah. I mean, but the point is you guys are

neither one of you are really wrong it's just a matter of laying out a strategy to do this and george i did this many years ago we were uh just coming out of being broke we're starting to get a little money finally we're nearly to the point that annie is at this at this stage but we had a little bit of money coming in and sharon had this uh we had little kids and we had this god awful two-tone blue astro van do you remember those yeah nasty looking little vehicle and it was nasty inside because it had three dogs and three kids in it and some things you talk about stuff i mean nuclear waste was in the floorboard so and this thing was bad and sharon's like gets this idea now we're starting to get a little margin she's like i need a suburban i need a new car and i'm like yeah well

i mean you know santa claus needs reindeer too but we're you know we're not not gonna happen yeah i'm work doing stuff down at the office. I got, I got an investment I need to make down here to get some more money coming in by doing this thing. And, uh, you know, we got 20,000 bucks and we can either buy her a Suburban or we can go use that 20,000 down here at the office and make some more money. And, um, you know, and we went at it as if, if she got the Suburban, I would never do the investment. Or if I did the investment, she would never get the Suburban.

And what we learned was what we just taught Annie, which is, oh, shut up. Both are going to happen. Both are going to happen fairly quickly. Just decide which one's first. Flip a coin. Being the wise husband that I am, she got the Suburban first. And then I did the investment second. But it really, I mean, we had a big old fight about it.

Because it was all or nothing. And it's not all or nothing. Usually it's just, it's not no, it's not now. No is not really what we're saying. We're saying not now. We're not really we're saying we're saying not now we're not really saying no we're not going to do the heat and air in the windows in the foundation it's not now that's the thing and uh it's kind of like how children are when they go well if it's not going to happen now i'm going to throw a giant fit because it's never going to happen yeah and

that's not what it's just which one's first do we pay off the house or do we do the renovations? It's not an either or. We're going to do both. Let's just decide the order and which one makes the most sense mathematically and emotionally and relationally and all that, right? So there you go. I tried to Google a photo, just this picture Dave and Sharon Ramsey driving around. No, that's not it. This two-tone. That's not, that's, that was nicer.

We're getting closer. That one's nicer. There it is. That's, that's not it. It's two-tone. That's not. That's. Are we getting closer? That was nicer. We're getting closer. That one's nicer. There it is. That's. That's. You still didn't get it. That's going to be a new segment. That's a full-size van there.

But yeah. That's going to be your next car. That's closer, but it was a lot uglier than that. That one's a pretty good looking van. Hey, drive like no one else. And later, you can drive anything you want. There you go, babe. Wow. There you go, babe. Wow.

There you go. This is The Ramsey Show. Thank you for joining us, America. We're glad you're here. Open phones at 888-825-5225. George Campbell, Ramsey personality, is my co-host today. Thank you for being with us. 888-825-5225. Our Building Wealth Live

Tour continues February the 16th. That sounds suspiciously like, what, next week we'll be in Indianapolis. With Rachel Cruz, George Campbell, Jade Warshaw. And then we're heading over to Austin, Texas the next week with Ken Coleman, Dr. John Deloney, and Jade Warshaw. This is me on all of these. April 24th, I'll be heading to Salt Lake City with Rachel Cruz, George Camel, and Christina Ellis.

Final stop is Anaheim May 2nd. Ken Coleman, Dr. John Deloney, me, and Christina Ellis. Tickets start at $49. You can get a four-pack starting at $175. We'll be signing pictures, answering questions, doing panel discussions, talking about building wealth in 2023. It sounds weird out there right now, but you can actually win at money, and you can build wealth in the middle of

this craziness that we call the United States today. It can still be done. Our question of the day comes from Teresa in Georgia. George, take it. Teresa's asking, can you all explain how you think about home improvement loans to increase the size of your house versus buying a bigger home that is more expensive? Logically, I do not understand how it's different to increase the size of your house versus buying a bigger home that is more expensive. Logically, I do not understand how it's different to increase your mortgage versus taking on a home loan so you do not have to move. I think your advice would be to increase mortgage and move versus taking on a home equity loan, but I don't understand how it's different, both mathematically and logically. I have no debt but my house and I have a fully funded emergency fund.

Interesting. So she's saying, hey, I have a home. Why not just take the HELOC and do home improvements versus moving and buying a bigger home? Well, number one, home improvements usually can be cash flowed. And so she's right in that regard. Now, if you're going to do a $200,000 improvement, you're going to add a wing to this thing, okay? That's something most people can't cash flow. In that case, you might take out a loan and then refinance and have a permanent mortgage in place when you're done.

However, what normally happens in a situation like that is you're making another mistake, which is you're overbuilding the neighborhood. And if you become the most expensive house on the neighborhood with a weird $200,000 wing, you're not going to get your money back out of it. The home value didn't increase by 200 grand is what you're saying. Because the neighborhood is limiting it. So let's say you're in a neighborhood that runs three to four hundred thousand dollars and your home is currently worth three hundred thousand and you put an improvement on it of two hundred thousand you now have to get five hundred thousand in a neighborhood that people don't look for five hundred thousand dollar homes they're looking for three or four hundred thousand dollar homes in that neighborhood they don't if they got five hundred thousand they don't come to your neighborhood uh and so plus your

house at that point unless you're an incredible remodeler an incredible architect you generally are building a weird structure i mean when you start doing stuff like that. So, you know, we need a, our family is growing and we need another, you know, we need some more rooms. You very often run into the situation where you're overbuilding the neighborhood, but that's a different problem than logically I don't understand the difference. So if you were doing a, something that's just out of range

of cash flow and you're not overbuilding the neighborhood, you know, you're still going to be not the most expensive home something that's just out of range of cash flow and they are not overbuilding the neighborhood, you know, you're still going to be not the most expensive home in the area and you're not building a weird structure, you're not messing up in another way, and you were to refinance a home equity loan after you did this into a permanent mortgage and one mortgage, then there is no difference and we're not against that. But I got to tell you, the number of times that happens that you don't end up violating one of these other things is so small. Usually a bad decision is made somewhere here in the process. Yeah.

And, you know, basically, you know, I emotionally don't want to move. I don't want to leave this area, but I want a house that's bigger than this area supports and has more attributes than this area supports value-wise. And so, you know, what we're usually doing is kicking you out for your own good and putting you into a neighborhood that fits your new needs. And, you know, but mathematically, logically, you know, it sometimes could work and we're not against you doing that but um but you know let's say you're doing a twenty thousand dollar rehab and you make a hundred thousand well just shut up and budget it i mean save up the money and do it that's not that's within that's within cash flow reach

yeah it's not worth going and you wouldn't move up twenty thousand dollars in house either so that's not part of her it's not one of her examples it wouldn't move up $20,000 in-house either. So that's not part of her. It's not one of her examples. It wouldn't fit with her example. So good question. Home improvements. Too much HGTV. But, I mean, it's a good clarification that she brings.

I like it. Tim is in Pittsburgh. Hey, Tim, what's up? Thanks for taking my call. Sure. My question is, at the age of 69, does it make sense to backdoor a roth ira if you're going to leave the money alone if you're going to backdoor it and turn around take it out the front door no okay yeah this is this is money that i'll probably never Exactly. You're going to leave it as an inheritance.

Correct. And if you live 10, 20 years, 79, 89, which you're very likely to do unless you're unhealthy right now, statistically you are anyway, then you're going to be really glad. Plus, the Roth IRA now does not require RMD, does not require required minimum distributions at 73 like a traditional does. Okay. So you're able to just leave it there. For assistance, would I go to a tax person? No, you go to one of our smart investors. No, you go to an investment broker.

One of our advisors that we recommend, they don't work for us, but they're called SmartVestor Pros, and they're people in the mutual funding business, and they'll help you get one open and help you do the back door and run that out. But the math works out that if you're going to leave it alone 10-plus years, the Roth comes out ahead, and it sounds like you're going to leave it alone 10 plus years, the Roth comes out ahead. And it sounds like you're going to leave it alone that long.

And because you don't have to touch it at 73 because it's not, there's no RMDs anymore on that. No required minimum distributions. The new SECURE Act. And by the way, that SECURE Act is, there's a big blog on it. It's the SECURE 2.0 Act. It's a big blog at ramseysolutions.com, and you can read that blog post and learn a lot about it. It did a lot of interesting things to retirement,

and almost all of it's good. A few weird things, but we have a really good, thorough article on that. And what's a backdoor Roth IRA? So this is a great tool when you want to maximize your wealth, and the traditional IRA has income limits. And so if you are at a point where you've maxed out a lot of these retirement tax-advantaged accounts, you can open up a traditional IRA, you can max that out, and then you convert those funds to Roth,

meaning you pay the taxes at that point, but then you never pay them again. Yeah, so actually you open an after-tax traditional and instantaneously roll it to a Roth IRA. I do one every year. And I'll be 63 this year. So I keep doing them. And for those that go, when do I do this in the process? Only do this once you're kind of a baby step seven with a paid for house. If you've got a big tax implication, I'd rather see those funds used to pay off your mortgage versus convert the funds your household income is over 200 000 you don't qualify for roth ira anymore and so the only way you can get a roth ira is open an after-tax traditional and roll it to a roth and uh it's actually a weird little loophole

in the law and they've never figured out a way to close it so they threatened it there was some threats and people got spooked but they haven't done anything yeah that don't it won't matter it won't go back and undo the ones we've already done it just won't be able to do it going forward if they ever stop it up but for now that loophole is there and that works for those of you making more than 200 000 if you're at the point that you want to put more into retirement, and George said normally that's a baby step seven, that you're trying to get there and do that. So I do anything I can do to keep the government's hands off of money. Because if you haven't noticed, they're stupid.

They're stupid. And we don't want to give stupid people money. So anything that's legal, keep their hands off of it. Because I don't want to give stupid people money. So anything that's legal, keep their hands off of it. Because I don't want to give stupid people money. They're stupid. Well, they're great at spending. Is my tax time passive aggressive nature coming out?

Dave gets grouchy every April. I don't have a passive aggressive nature. I'm aggressive aggressive. You're like Punxsutawney Dave. Six more weeks of grouchiness until tax season's over. Stupid. This is the Ramsey personality is my co-host today in the lobby of Ramsey Solutions on the

debt-free stage. Kevin and Sherry are with us. Hey guys, how are you? How are you? Welcome. Where do y'all live? We're out of Denver, Colorado. Denver. Welcome to Nashville. Thank you, sir. And how much debt have you guys paid off? I was a little over $98,000 in about 22 months. Wow. And your range of income during that two years oh we're about 155 to about 210 wow good for you what do y'all do for a living um i'm in the it networking space i work for a large investment and banking firm cool and i worked for hobby lobby during that time oh great very good good for you guys well well done what kind of debt was the 98 000 uh just as you say

everything uh kind of normal some credit $98,000? Just as you say, everything kind of normal. Some credit card debt, a couple vehicles, home improvement stuff that we obviously didn't pay for in cash. So, yeah, normal stuff. There you go. You were normal. Yeah. And how long have you all been married? 23 years.

So after 23 years of marriage, after 21 years of marriage, you're sitting here with normal amounts of debt. What was the wake-up call? How'd you get onto this Ramsey stuff? Go ahead. So actually, I wanted to do this way back about probably 20 years ago when we kind of, our kids were first born. Come on, Kevin. Slow learner. I actually had a friend introduce me to Financial Peace University and she actually shared her CDs with me, let me listen to it.

I was like, let's do this. I bought envelopes, I started it. And every time he would be like, oh, he'd go spend money. I'm like, that's not in the budget. What are you doing? And he was, I don't know. I don't want to do this. So we actually went through some marital issues and that really kind of got us some got us

going so yeah i'll let him finish the rest so we went through those problems and she had even moved moved out of the house and you know pretty pretty rough times and as we uh started working on that and all the other you know other problems we had this was you know finances was one of them and um and uh i was on board right we gotta get gotta get our marriage right so uh we we did that and it's been uh full bore ever since good for you thank you that's incredible yeah you you said it's whatever i got it whatever it takes to do the marriage right yeah and being on the same page on the money is one of the elements and i want to put this together and i'm gonna sacrifice my uh my pride yeah and go do that i was good for you that's it right is good for you it's all of us i mean we're all do that yeah good

for you though that's really manning up i'm proud of you thank you appreciate it very cool i was hollering at you a minute ago so what did this financial transformation look like when you said, all right, I'm willing to do whatever it takes. What's next? Really, it was him taking over the finances. So I used to do all the bill paying and stuff like that. And so he kind of took it over and he created a budget and then started listening to you guys and was like, okay. Was your mind just blown when you saw him sitting down doing the budget himself? Yes. And then now he usually gets upset with me

because he's like, why don't you look at the budget with me? I'm like, I don't care. Just tell me what I have. Tables of turn. Wow, this is a complete turn. I finally applied the engineering job, you know, thinking in mind to that.

And now I probably overdo it. I'm in my budget sheet daily. So, yeah. Well, I mean, it's a formula and it's a process that works yes and that's what engineering is yeah and so it's a it is a natural way for your brain to work yes it does line up with that that's funny and now it's completely turned around would you get in here and do the budget yeah totally yeah and it really has helped our marriage a ton just i mean, I can't express that enough. I didn't feel like the finances were part of our problem or the main part of our problem, but just that communication and working through the finances together.

A lot of marriage counselors use getting a couple that are having marriage trouble on a budget because it's not about the budget. It's about where your money goes is your dreams it's your values it's your fears and so it's when you're agreeing on your life when you're agreeing on your money it's not that the the money problem but the fact that you weren't agreeing on your money is you weren't agreeing on the other stuff too yes and i mean we we always knew we were blessed to make what we made and uh but yeah where where's it going how you know and for us it was we'd end every year and i'd get a bonus and we'd pay off debt and then a few months into the year we'd already start with that so yeah well i don't know who did your marriage counseling but they did a

great job you look like a couple of newlyweds i'm impressed you said 23 years married i was like wow yeah i mean you look like it's all fresh and new and that's cool for the last couple years yeah it just kind of feels that way yeah and the 22 months of getting out of debt correlates with the healing yeah of and you moving back in and all that right yeah absolutely oh wow that is powerful guys thank you so we're a little piece of the story of an awesome story about a marriage being redeemed. Yep. Walking in here. I said it to,

to, to Sheree. It's a, like, uh, you know, meeting some, some friends.

Cause I listened to you every day. And so it's like, Oh, it's cool to see you guys and meet you. Just us. Yeah. Just exactly. Devastatingly exactly what you expect.

Oh, my goodness. So, Shiri, this was a 20-year journey for you. It's a little bit newer for Kevin. Was there a thing that the knob turned when you went, I listened to the show, I read the book, I went to Financial Peace. What was the thing for you where you went, light bulb on, I've got it? You mean when I, like before? When Kevin finally got on board 20 years later,

was there a thing that he connected to where he went, that's it, I get it now? Or was it just a rock bottom moment of the marriage? I think that was it. I think it was that. I think that he was not willing to give up and I wasn't willing to give up either, but we just couldn't figure it out.

And that was the thing we needed was to get on board on that. So it made a big difference for us. I think, you know, we, we had kids very young, uh, even before we were married and maybe that's where some of the, you know, things, you know, started wrong, but, um, of course having our kids wasn't wrong, but you know, then looked at it and thought, gosh, we have so much life ahead of us. Right. And we, I want to enjoy the things that we've worked hard to enjoy and have been blessed with. And you know, that was a big part of it too. I want to, you had a vision for your life. I want to enjoy it with my friend, right? My best friend, my wife. So yeah, that's awesome awesome and who are your biggest cheerleaders on

this journey really we did it yeah it sounds weird we really did on our own most people in our life were naysayers kind of like this is not why are you you know yeah and kind of like even like why are you doing that a lot we got that like you know i would say something to someone in my family and they'd be like i don't know why you're doing that. Like, that's crazy. Like, why? So we kind of just got on board and made it work. Enough trying to get anybody to be positive. We'll just move on.

Yeah, exactly. Good for y'all. Thank you. How's it feel now that you're free? Amazing. Yeah, it really is. What do you tell people the key to getting out of debt is? I mean, Dave, for me, it's a few things, right? But it's being a Latino man, you know, not listening to the narratives that are out there and, you know, hard work.

Our parents, you know, my folks, Cherie's folks, hard work, honesty, you know, doing what you need to do. And that's got us to where we are and so that's the key right that discipline and what you teach is is that discipline and stability so that's that's the key to me way to go you guys way to go hey we got the live and give bundle for you that's the total money makeover book thank you the babys Millionaires book and a one-year membership to Financial Peace University. Thank you. You can go through it. You can give it away.

Maybe other people are inspired by your overall story and the money part of it. You can help them with behind them one of those things. Thank you. That's awesome. Good job, man. Congratulations. Thank you. You guys are neat.

Thank you. You're fun. Thank you. You're fun. I'm so proud of you. We appreciate it. Very, very well done kevin and sheree denver colorado 98 000 paid off in 22 months making 155 to 210 oh and they saved their marriage

count it down let's hear a debt-free scream three two one we're debt free! Yeah! Woo-hoo! This is how it's done. What a journey. It took 23 years to decide to do something for 22 months that set them up for freedom. Interesting. I mean, it's just wild when you think about it that way. Are you willing to sacrifice for just this much time, or do you want to suffer for the next decade or two

in mediocrity? You get to decide. This is The Ramsey Show. Thank you. We'll be right back. Our scripture of the day, John 8, 32, then you will know the truth, and the truth will set you free. Sojourner Truth said, truth is powerful and it prevails. Is that a person? That's weird. Sounds right.

I feel like I've heard that before. Okay. What do I know? All right. George Campbell, Ramsey Personality, is my co-host today. Ron is with us in Philadelphia. Hey, Ron, welcome to The Ramsey Show. Hey, guys.

Thanks for taking my call. Sure. How can we help? Well, about coming up on two years now, I came out of a divorce, had to sell the home, moved back in with my parents. Um, it's getting kind of, uh, long that, uh, finding a home, uh, I've completed the first three of your baby steps after finding your total money makeover book and reading it front to back pretty quick. And I just want to know if I should just put everything into savings

for a down payment on a home, or if I should do four, five, and six like you suggest. Okay. We also suggest Baby Step 3B in the total money makeover. Do you remember that? Vaguely off the top of my head is just, yeah. So 3B is where you would save up for a down payment. You already have the emergency fund, you have no debt, and so you can really focus in for a few years to save up that down payment. And if you want to invest, you know,

people invest from zero to 15% while doing that. It just depends on how aggressive you want to be in getting that house. So I have about 40,000 saved for a down payment and I'm just, it's been two years and I'm just trying to start a new life with a new woman in my life. And so just get out there and be a family again. Are you renting right now? No, I live rent-free with my family. So, I mean, it's great. It's helping me so much that I can put $4,000 to $6,000 a month away in savings.

It's just daunting. I'm 37. Okay, and what do you make a year? Without overtime, probably $70,000. This past year I made about $100,000. Okay, and you have $40,000 cash, and you live in your parents' house at 37 years old. Yeah.

Okay. Go rent an apartment or go buy a house. I don't care which. If you're not ready to get the house, then I'm renting while continuing to save up the down payment. And don't buy a house with the new woman in your life unless you're married to her. Gotcha.

Because you're going to get yourself in another mess, okay? So, you know, if you want to wait until you're going to get yourself in another mess okay um so uh you know if you want to wait until you're married and then the two of you go pick out the house then you would rent an apartment does that make sense yes but i think it's going to be great for you the relationship with her uh everything just to get on out of there you've done a great job. You've gotten on your feet, and you're feeling antsy. You're feeling the need to jump from the nest. And so Uncle Dave's going to push you. Fly and be free.

Rachel's with us in St. Louis. Hi, Rachel. Welcome to the Ramsey Show. Hi. Thank you so much for taking my call. I'm super excited. I am a homeschooling mom of a sophomore daughter, and we are doing the Foundation University Personal Finance class through the Grampy Network.

Very cool. Love it. Oh my gosh. Awesome class. And we just watched Borrowed Future, George. Oh my goodness. You're getting your teacher's pet today. So my daughter is starting her first job at 16, and the personal finance class and the joys of compound interest has really caught her attention. And I would like to help her find some type of high-yield account that she can start with. And I have no idea where to start, and so I was hoping you could maybe make a suggestion for something online that would be safe and appropriate for a 16-year-old. Okay. So are you wanting her to just save up a pile of cash for her next goal, like a car or college education? Yes. She is actually, we have her college education saved for through 529 because she is going to do a state school and do school smart with scholarships and then state tuition.

And so with that, we are good. So this money would be for probably life after college to start her life. Okay, so she's intrigued with the compound interest tables and the understanding of Jack and Blake and all that kind of stuff, and she sees that and wants to get that kind of stuff going. Yeah, absolutely. More than I'm trying to save up to buy a car in September. Yes.

She wants the compound interest. She wants to be a millionaire. Okay. All right. That's fun. Okay. So let me give you the truth, and then I'll tell you what to do to scratch her itch, okay? The truth is nothing she does right now is going to cause that to happen.

Okay. The knowledge that she has, if she applies that as she comes out of college, starts a family, has an adult household income, and in her 20s begins to apply the baby steps, stays out of debt, builds an emergency fund, and starts jacking up that 401K and that Roth IRA. That's what's going to make her a millionaire probably in her 30s. But it's not really going to be that she puts her Chick-fil-A income working at Chick-fil-A into something at 17.

That's really not what's going to get her there. But I want her to do it anyway. Okay? Okay. So now that we've established this is not going to make her a millionaire, but instead the knowledge is going to make her a millionaire later, then that changes the pressure of this. Now what we're really doing is not an investment for the sake of building wealth.

We're doing an investment as an object lesson from the homeschool. So she can actually see the practical thing happen that she studied, and that scratches her itch as well. It gets her started. But the truth is she's not going to put enough money in there at this age to become a millionaire unless she's some kind of wonder child or something you know what is she doing for work um she's working at a local ice rink she's going to be a learn to skate skate guard yeah skate guard money doesn't make you a millionaire when you're 17 okay but it will help you start a mutual fund and you can learn how they work and you'll be way ahead of the curve which is what happened when you

taught her these lessons to start with she's way ahead of the curve so just jump online at ramsey solutions.com and click on the smart investor pro in your area they love teaching teenagers by opening their first mutual fund and they don't make squat on it they make 15 on it or something i mean it's not because again it's not enough money to to screw with but it's a great thing because it gets her brain started on this and then you know when she's dating some guy who goes oh mutual funds are stupid and i'm gonna run up my credit cards she goes you're not the one you know because we've got this thing laid out. And so what we're doing is the same thing. We're extending what you've already done

with the homeschool lessons from foundations. But it's, you know, what you really do in high school is not what gets you there. It's the things you learn that you apply as you enter adulthood. And it's creating those habits and that muscle that's going to get her there. And there's a lot of things you can do from short-term savings, a high-yield savings account or money market account. You could do the mutual fund and a taxable brokerage. This is an object lesson. I would do a mutual fund. In a taxable brokerage? Yes. Okay. Because there's also custodial Roth IRA, but that's retirement. Nope, wouldn't do that. I just would open a mutual fund. Just go get fund of america or whatever put a hundred

bucks in it and just well it takes a thousand to get it open or whatever but get it open learn how to read the statements learn how to sit at the desk with the investment advisor smart investor pro learn the lingo watch the statement watch how the share price goes versus what you hear on the news what you know and have the emotional experience of all of that. But that $1,000 or that $2,000 that goes in there from ice rink guard money is, again, not going to be the cause mathematically of your wealth. But you're setting the pattern in your life and the knowledge base in your life that is going to cause that.

And what a great parent. I know. Absolutely. Man. What great parenting. Rachel, you're a star.'re amazing well done that puts us out of the ramsey show in the books we'll be back with you before you know it in the meantime remember there's ultimately only one way to financial peace and that's to walk daily with the prince of Peace, Christ Jesus.

Hey, George Campbell here. If you love the show and you want a deeper dive on your money journey, we've got a weekly newsletter that gives you helpful articles and tips on following the Ramsey way. Just go to RamseySolutions.com today to sign up for the newsletter. Again, that's RamseySolutions.com to sign up for our weekly newsletter.