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Dave Says – Helping is often more than just giving

Need some financial advice? Debt and income crisis? Pay off the house mortgage first? Check cashing? Taxes? Credit Cards? Check out what folks are asking Dave Ramsey.


Helping is often more than just giving

Dear Dave,

Dave Ramsey

My husband and I met a young woman through an outreach program at church. She is a single mother with a small child, and recently she asked us for money, so she could buy baby food and diapers. This isn’t the first time she has asked us for money. In the past, she has used money we’ve given her to buy alcohol for herself after telling us it was going to be used for the baby. She truly does need financial help, though. Can you give us some advice on handling this situation?


Dear Angela,

Financially speaking, her problem sounds as much like a mismanagement of money as it is a lack of money. That, and she seems to have an issue with lying. If you’re determined to help this woman, you can put conditions on your help designed to improve her decision-making abilities and her life.

If someone is bold enough to ask for your money, you have every right to attach requirements to the money for their own good. One of two things will happen if you handle it this way. She’ll either graciously accept your conditions and welcome the help, or she’ll get angry and say you have no right interfering in her business. I’ve never had a problem helping people who have good hearts and just need a break. But if someone cops an attitude with me in a situation like this, I wouldn’t be breaking out my wallet anytime soon.

If you choose to do this, make the money a gift and not a loan. Concentrate on trying to get her on a path where she’s a little more honest with you and thinks a little straighter. Hopefully, as a result she will start making better choices. Teach her how to create and live off a budget, or help her enroll in a personal finance course, too. Right now, just handing her money is like giving a drunk a drink.

This whole situation is a lot bigger than helping someone with baby food and diapers. The answer to that is easy. In this case, however, I’d probably give it to her in the form of a gift card. Some of those don’t allow alcohol purchases. You could avoid that possibility, too, by getting things for the baby yourself and taking them to her.

In many cases, truly helping someone is a lot more work than just throwing money at them. Sometimes, you have to get down in their mess, get real with them, and walk with them.



Adjust our emergency fund?

Dear Dave,

My husband and I have been married five years, and we’ve decided we want to have children. We’ve both been working full time since our wedding, and we were wondering if we should adjust our emergency fund and retirement investing to accommodate all the upcoming life changes that go along with having a bigger family.


Dear Rachel,

When it comes to an emergency fund, I’d stick with what I recommend in the Baby Steps. A good emergency fund of three to six months of expenses should be fine. If you feel safer leaning toward the six-month side, that’s fine. As far as investing is concerned, that’s Baby Step 4. This means 15 percent of your household income going toward retirement. None of that really changes.

Now, with another person in the house, your day-to-day expenses are going to increase. That’ll make it even more important to make sure you’re living on a written monthly budget. What you don’t want to do, is quit your job to come home and be a full-time mom, then find yourselves dipping into the emergency fund. Being a stay-at-home mom is fine. It’s a wonderful thing if you can afford it. But if that’s the plan you need to budget accordingly, and practice living on just your husband’s income before you quit your job.

God bless you two, Rachel!


Micro investing apps?

Dear Dave,

What is your opinion on micro investing apps like Acorns and Betterment? Are these good vehicles for building wealth in the long term, and are there any major drawbacks to these types of services?


Dear Alex,

I’m not saying there’s anything really wrong with Acorns or Betterment, but they do different things. Acorns is more of an invest pennies, round-up kind of program, where Betterment is kind of a robo-investing deal.

Here’s the thing. Micro investing is going to create micro wealth. And the big downside is you’re going to feel like you did something important. The way you end up with money is by investing money. The way you end up with more money is by investing more money. You can argue all you want that using things like these create extra money. Yeah, but not really. The returns are still micro. An app doesn’t make two dollars turn into twenty dollars.

It’s okay to use apps like that. I’m not mad at them, and I don’t think they’re a rip-off or anything like that. What worries me about these kinds of things, in an investing sense, is they give the illusion that you’ve done something significant with your money.



Beneficiary mistakes can cost a fortune