Yahoo Finance Dave Ramsey: 9 Money Tips for Gen Z To Know
Radio personality and personal finance guru Dave Ramsey is known for his brutally honest, straightforward financial advice, especially when speaking live with callers on “The Ramsey Show.” He’s been advising people on financial matters for the better part of three decades, so he’s helped boomers, Gen X, millennials — and now Gen Z.
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Here are some Dave Ramsey money tips for Gen Z that can help them set off on the right financial foot or back on the right track with their money.
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Be Very Intentional With Your Money
If you ask Ramsey how a young adult can build wealth, you won’t get a simple answer like “start a Roth IRA” or “invest in mutual funds.” He’ll tell you to get intentional with your money.
Here’s his cause and effect of how financial intentionality leads to wealth: Being intentional with money requires you to budget. Budgeting helps you live within your means, enabling you to avoid debt. By avoiding debt, you’ll have available resources to invest — and investing is how you’ll build wealth.
Even if you’re not ready to begin thinking about wealth-building, a budget can help you reach more immediate financial goals, such as getting an apartment or car.
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Compound Interest Is a Millionaire’s Best Friend
Young savers have one massive advantage over older people — time. By saving early and consistently, Ramsey says, anyone can become a millionaire through the power of compound interest, allowing your money to go to work for you.
Understanding the impact of time on compound interest can be a powerful motivator. Use a compound interest calculator to see how your money can grow over 20, 30 or 50 years. This might inspire you to save more now while time is still on your side.
Do These Things Before Saving for Retirement
The earlier you begin saving for retirement, the better, but Ramsey advises taking a few steps first, depending on whether or not you’re debt-free.
He says if you still live with your parents but have no debt:
Get your career started.
Save enough money to get out on your own.
Build an emergency fund of three to six months of household expenses.
Start investing 15% of your household income.
If you have student loans or other debt, Ramsey’s advice is clear: Focus on getting out of debt before saving for retirement. He emphasizes, “You shouldn’t be investing until you’re debt free and have a fully funded emergency fund.”
Attack Student Loan Debt While You’re Young
Ramsey has some tough-love advice for you if you’re buried in student loan debt and looking for a way out. But he has the same “you got yourself in, now get yourself out” advice to Gen Z that he gives to older generations buried in debt: Work as much as you can, lower your essential expenses, drop the discretionary spending and attack your debt like a zealot.
But for Gen Z, he has an additional tip: Attack it while you’re young and have the energy.
Ramsey’s advice is harsh, but the reality is that the future of student loan relief programs is uncertain. Prioritizing your student loan debt may be the way out.
Make a Plan To Move Out on Your Own
Another hot-button Ramsey topic is young adults still living at home. He doesn’t blame young people — he blames the parents. But he advises Gen Zers still living at home to work more, spend less and make a plan to get out on their own.
Thanks to inflation, Gen Z has faced challenges in affording everyday living expenses. According to The State of Personal Finance Report by Ramsey Solutions, 67% of Gen Zers report having trouble paying bills. Creating and following a plan can improve your financial situation so you can transition from your parent’s home.
Spend No More Than 25% of Your Take-Home Pay on Rent
The State of Personal Finance Report also revealed that 70% of Gen Z is struggling to pay their rent because of high rent prices.
Ramsey advises everyone, including Gen Zers just starting out, to commit no more than 25% of take-home pay to rent, including renters insurance. This is slightly lower than the 30% recommended by some financial experts. However, he says that spending more than 25% limits how much you have left over for other necessities, and you may struggle to pay off debt or build savings.
If you have room for and can tolerate a roommate, this can reduce your rent and utility bills.
Get Pre-Marital Financial Counseling
Ramsey cautions against marrying into debt without a solid agreement and a plan for handling it.
In 2023, for Gen Z, the average student loan balance was $14,380, and the average credit card balance was over $3,262. When you get married, there is a good chance that you, your partner or both will bring debt into the marriage. Ramsey suggests financial counseling as part of pre-marital counseling. It can teach you how to handle finances as a team and help you avoid becoming a divorce statistic.
Understand the Consequences of Borrowing
Another Ramsey State of Personal Finance Report stat Gen Z should pay attention to is this: “One-third of Americans (32%) didn’t understand the consequences of taking out student loans before they signed on the dotted line.”
Many Gen Zers have yet to graduate from high school and can avoid this mistake. But all of Gen Z can extend this advice to any type of loan. There also may be a lot of homeowners who didn’t fully understand their mortgage before signing.
Knowledge Is the Way Out
You’re not alone if your parents didn’t teach you much about money during childhood. According to Ramsey Solutions, 130 million adults were never taught the money lessons needed for financial success in adulthood.
However, Ramsey says, “Financial change is 80% behavior and 20% head knowledge.” By educating yourself about personal finance — budgeting, paying off debt, saving, investing — and developing strong money habits, you can set yourself on a path to a comfortable and perhaps wealthy financial future.
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