With all its big business deals and philanthropic work, you would think that the billionaire CEO of Berkshire Hathaway does not have time to teach the next generation of investors.
Not so. In 2011, the “Oracle of Omaha” helped create an animated series for children called Secret Millionaire’s Club, with Warren Buffett mentoring a group of enterprising children. He even expressed himself the first few years.
You may not have his legendary financial insight, but over the years, Buffett has offered parents some wisdom on how to teach their own children about money. Here are six tips you can use to transfer your knowledge.
1. It is seriously never too early to learn
When Buffett says he should start teaching financial skills early, he means early.
“Sometimes parents wait until their children are in their teens before they start talking about money management – when they might start when their children are in kindergarten,” he said. CNBC.
So how do you teach financial literacy to a three year old? Forget the stock market and start with the classic: money does not grow on trees.
You can explain to young children that spending is not as easy as typing anywhere on the map. It takes hard work to make money, so do not spend lightly.
2. Learn the value of saving – even $ 1
Once they are old enough to understand, you need to teach your children to save its value.
Buffett wastes no time teaching children Secret Millionaire’s Club about interest.
“Saving even a little money can pay off,” he says. “Instead of spending money on a soft drink you don’t really need, put it in savings, and it’s earning even more money by earning interest.”
But lessons from cartoons go just as far – your children can use practical experience to save better. You can get their own savings account and debit card.
With some special programs you can even assign tasks, set up automatic deposits for their grants and even provide interest provided by parents. They will be able to see how much money they are earning and saving, but do not worry, you have complete control over how much they can spend with the card and where.
3. Be a heroic role model
Your children will pick up on your habits – the good and the bad. Buffett admits to his own father that he showed him how to build the right habits.
“My dad was my biggest inspiration,” Buffett said in a 2013 interview. CNBC. “He was my hero when I was six and he’s still my hero now. He is an inspiration to me in every way. What I learned from him early on was to have the right habits early on. ”
Do you want to become a hero? Inspire your children by making smart financial decisions. This does not mean that you should be an expert investor, but at least show your children that you know how to keep your home in order.
It means, first of all, that you have cleared up the annoying debt that you have accumulated. If you are struggling with high interest rates – for example the type of credit cards – consider a debt consolidation loan to process all the debt into one loan with a much lower interest rate.
You can find free services online that will help you quickly compare quotes from different lenders, making it easy to find the best rates.
4. Separate needs from needs
A difficult early lesson for kids: you can not have everything you want.
Before they can manage their money responsibly, you need to teach them that there is a significant difference between needs and needs.
In an interview with CNBCBuffet suggests that your kids make a list of five or ten things they want to buy. Then go through each item with them and mark whether it is a need or a need, and explain why.
If you do shop for the needs – or the occasional desires – then show your children that they can also make sensible decisions at that stage. Not every store, for example, has the same prices. With a free browser extension, you can instantly search for better prices at other sellers while shopping on Amazon, Target and more.
5. Increase your knowledge
Don’t have all the answers? This is normal; successful people never stop learning.
“Developing a lifelong pursuit of learning and educating yourself is important to every individual,” Buffett’s animated self said in an episode of Secret Millionaire’s Club.
This is great advice for parents and even better advice for those just starting out on their educational journey.
“What I always say is learn to learn,” says Buffett, who reads several newspapers every day. “Do not be afraid to keep learning by taking a class or reading about innovations and new technologies.”
Start by encouraging your kids to pursue their hobbies, whether it’s an after school program or extra reading material. This dedication and a passion for knowledge will serve them well in all areas of life, including their finances.
6. Nurture their entrepreneurial spirit
It was not long before Buffett began to sharpen his business skills.
A 6-year-old Buffett earned his first few cents long before Berkshire Hathaway to sell sticks of gum in the area. When he saw an opportunity for even better margins, he switched to a quarter of a packet of Coke and each sold the cans for a nickel each.
Your son or daughter may never grow up to lead a multinational conglomerate, but encouraging them to see opportunities for money will help them further. Even a lemonade stand will help lessons such as problem solving, goal setting and sales.
You could also consider building up some seed money for your child’s future ventures with an automated investment program. Some programs even collect the surplus of all the small purchases you make every day and place it in an investment account for your child.
When your child then becomes an adult, they can take over the account and use the lessons you have learned to make it grow even more.
When you are in your teens, you may also want to consider opening a joint investment portfolio together. Some online brokers even give new users a free stock when they sign up, making it a perfect platform for your child’s beginner portfolio.