Financial Literacy - Families and Finance
Ellie Kay
smart spending
Family learns to spend less, live more

Spotlight: Ellie Kay

Ellie Kay, an experienced skydiver and parasailer, shrugs off the danger associated with her risky pastimes by focusing on the rewards -- conquering fear and the exhilaration of freefall.

Taking on unnecessary risk is not normally a trait associated with the staid world of personal finance, but Kay isn't your ordinary household finance wizard.

If there's a novel way to squeeze an extra dollar out of the household budget, chances are she's mastered it.

Fifteen years ago, things were different. Newly married and a stepmom to two children, Kay's family was mired in $40,000 of debt and squeaked by on a single military income provided by her husband, Bob, an Air Force pilot.

At a glance
Name: Ellie Kay
Hometown: Palmdale, Calif.
Education: Bachelor's degree, Colorado Christian University in Lakewood
Career highlights:
  • Best-selling author of 13 books, including "Living Rich for Less" and "A Woman's Guide to Family Finance."
  • Financial commentator for ABC's "Nightline," ABC's "Money Matters," Fox News' "Your World With Neil Cavuto," CNBC "Power Lunch," CNN, MSNBC, PBS and more than 800 television/radio stations.
  • Consumer finance educator and consultant to Fortune 500 companies including Procter & Gamble and Wal-Mart.
  • Founder and CEO of "Heroes at Home World Tour" conferences.
  • Recipient of Dr. Mary E. Walker Award for outstanding volunteer service to the U.S. Army.
  • Co-founder of The Smart Woman's LifeStyle Conference.

But rather than throw up her hands in defeat, Kay went on the offensive and shifted how the family consumed. Among other things, she became a coupon guru and bought used clothes for her kids at garage sales. Whenever the family came into "found money," Kay used it to pay down debt.

Her tricks she learned helped the family become debt-free in just two and a half years and she authored the book "Living Rich for Less."

For Kay, now a mother of seven, the lean years taught her important lessons. She spoke with Bankrate about the merits of volunteerism, why Americans should learn to live debt-free and why anyone would want to jump out of a perfectly good airplane.

q_v2.gifHow important is it for children to understand the fundamentals of financial literacy starting at an early age?

a_v2.gifIt's critical for children to be financially literate from a young age all the way up until the time that they graduate from college. With our own children, we've seen how important it is for our children to have an understanding of finances, a good work ethic, understanding credit, etc.

If you look at the No. 1 reason for divorce today, it's cited as arguments over finances. If we teach our children financial literacy, not only are we helping them on a practical level in life, but we may actually help them preserve some of their future relationships. They'll be less likely to argue about money in their own relationships or their marriage.

q_v2.gifShould financial literacy be part of the school curriculum?

a_v2.gifYes, I believe that it ought to be taught in schools and that the kids should have the option of learning that.

q_v2.gifIn your book, "Living Rich for Less," you talk about the transformation from new mom (with two children and $40,000 in debt) to being completely debt-free within two and a half years. How did you make that transformation so quickly?

a_v2.gifI was a born saver who was always good with money, and I was a businesswoman. I had been a(n) (insurance) broker so I understood about money, but I married into a financially challenging situation.

One of the first things we did as a couple was we had a paradigm shift from a victim mentality to a victor mentality. The first step was a mental paradigm shift.

The next steps were very practical. We reorganized our budget to the point where we made paying down consumer debt one of our main priorities, if not the main priority. We downsized to one car. We started shopping at garage sales for the kids' clothes. I became a master at couponing at the grocery store.

The last thing we did was we committed every unexpected dollar that came in toward consumer debt. That included income tax refunds, my husband's unexpected refund on a GI bill and a dividend from our insurance premium. That's how we were able to get out of debt so quickly. It was a very aggressive strategy, very Spartan, but only temporary.

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q_v2.gifU.S. households are now saving almost 6 percent of disposable income compared to just a few years ago, when it was closer to zero. Yet, do you think we're saving enough to live financially secure lives as well as provide for our children's educations and our own retirement?

a_v2.gifNo, I don't believe it's enough. Even 6 percent is not enough because of consumer debt primarily. I believe that the model has to be closer to a 10 percent savings rate in order to achieve those financial goals that you listed.

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