With all of his big business and philanthropic work, you would think that the billionaire CEO of Berkshire Hathaway would not have time to teach the next generation of investors.
Not so. In 2011, the “Oracle of Omaha” helped create a children’s animation series called Millionaires’ Secret Club, who introduces Warren Buffett as a mentor to a group of enterprising children. He even expressed himself in the early years.
You may not have your legendary financial acumen, but over the years Buffett has offered some wisdom tips for parents on how to teach their own kids about money. Here are six tips that you can use to convey your knowledge.
1. Seriously, it’s never too early to learn
When Buffett says to start teaching financial skills early, he means early.
“Sometimes, parents wait until their children reach their teens to start talking about money management – when they could start when their children are in preschool,” he said. CNBC.
So how do you teach financial literacy to a three year old? Forget the stock market and start with the classics: money doesn’t grow on trees.
You can explain to children that spending is not as easy as touching that card wherever you go. It takes a lot of work to make money, so you shouldn’t spend it frivolously.
2. Teach the value of saving – even $ 1
Once they’re old enough to understand, start teaching your kids the value of saving.
Buffett wastes no time teaching children in Millionaires’ Secret Club about interest.
“Saving even a little bit of money regularly pays off,” he says. “Instead of spending money on a soda, which you don’t really need, put it in savings and you will earn even more money with interest.”
But the lessons of cartoons only go so far – your children can use some practical experience to save better. You can get your own savings account and debit card.
Some special applications even allow you to assign tasks, set up automatic deposits for your allowance and even deposit interest provided by parents. They will be able to see how much money they are earning and saving – but don’t worry, you will have complete control over how much they can spend on the card and where.
3. Be a heroic model
Your children will acquire some of their habits – the good and the bad. Buffett credits his own father for showing him how to create the right habits.
“My dad was my biggest inspiration,” said Buffett in a 2013 interview with CNBC. “He was my hero when I was six and he is still my hero now. He’s an inspiration to me in every way. What I learned very early on with him was having the right habits from an early age. “
Want to be a hero dad? Inspire your kids by making smart financial decisions. This does not mean that you need to be an expert investor, but at least show your children that you know how to keep your house in order.
This means, first of all, eliminating any problematic debt that you have accumulated. If you are struggling with high interest rates – the type of credit cards, for example – consider a debt consolidation loan to roll all those debts into a loan with a much lower interest rate.
You can find free online services that will help you quickly compare quotes from different lenders, making it easier to find the best rates.
4. Separate needs from desires
A difficult initial lesson for children: you cannot have everything you want.
Before they can manage their money responsibly, you need to teach them that there is a significant difference between wants and needs.
In an interview with CNBC, Buffet suggests that your children make a list of five or ten things they would like to buy. Then, analyze each item with them and check if it is a need or desire and explain why.
When you shop for needs – or occasionally, for desires – show your kids that they too can make meaningful decisions at this stage. For example, not all stores have the same prices. With a free browser extension, you can instantly search for the best prices from other sellers while shopping on Amazon, Target and more.
5. Increase your know-how
Don’t have all the answers? This is normal; successful people never stop learning.
“Developing a lifelong quest to learn and educate yourself is important for each individual,” says Buffett’s excited self in an episode of Millionaires’ Secret Club.
This is good advice for parents and even better for those just starting their educational journey.
“What I always say is, learn to learn,” says Buffett, who is famous for reading several newspapers every day. “Don’t be afraid to continue learning by taking classes or reading about innovations and new technologies.”
Start by encouraging your children to pursue their hobbies, be it an after-school program or some extra reading material. This dedication and passion for knowledge will serve you well in all areas of life, including finance.
6. Feed your entrepreneurial spirit
It didn’t take long for Buffett to start honing his entrepreneurial skills.
Long before Berkshire Hathaway, a 6-year-old Buffett earned his first pennies by selling gum in the neighborhood. Seeing an opportunity for even better margins, he went on to buy six packs of Coke for a quarter and sell the individual cans for one nickel each.
Your son or daughter may never grow up to lead a multinational conglomerate, but encouraging them to see opportunities to earn money will help them in the future. Even a lemonade stand will help teach lessons such as problem solving, goal setting and sales.
You can also consider accumulating some starting capital for your child’s future ventures using an automated investment application. Some apps even collect change from all the small purchases you make each day and put it in an investment account for your child.
Then, when your child becomes an adult, he will be able to take over the account and use the lessons you taught to increase it further.
When they are teenagers, you can also consider opening a joint investment portfolio. Some online brokers are even offering new users free stock when they register, making it a perfect platform for your child’s beginner portfolio.