Warren Buffett is undoubtedly a famous man. And he is not just famous for his riches, but also for his rejection of the trappings of wealth. As we all know, he lives in the same house he had bought in 1958 for US$ 31,500, and his annual salary of US$ 100,000 is far less than what most CEOs (including many in India) earn.
But there’s one aspect of Buffett that many people don’t know much about. And that is about how he has brought up his kids when it comes to the subject of money.
Over the years, several interviews with his kids have revealed how Buffett’s message to them on money was loud and clear as they were growing up. And it was that money wasn’t what mattered in life. Instead, it was finding something you loved to do and then doing it.
In his book, “Life Is What You Make Of It,” Peter Buffett, a musician and the youngest son of senior Buffett writes about the values he absorbed growing up as the son of Warren Buffett and his late mother, Susan Buffett, and the path he has pursued to identify and pursue his passions in life.
He also writes about things like requiring children to do chores and letting them solve problems on their own instead of bailing them out. But he warns that children will pick up on their parents’ true beliefs about money – no matter what a parent says about money.
He writes, “If a child sees a parent trying to make themself look better by accumulating things, then (the child’s) going to think that’s what life’s about.”
My wife and I are trying to bring up our kids, our thirteen-year-old daughter, and six-year-old son, in a way similar to what the junior Buffett has written about in his book. And it is that our kids often don’t hear what we say, but they always see what we do.
So, whether it is teaching our kids about reading and learning new things, saving money and investing it, spending money and being frugal, our sense as parents is that our kids are learning the most seeing what we’re doing in real life versus what we just tell them to do.
Consider this discussion I had with my six-year-old as he returned from school a few days back. “My teacher gave me an extra mark due to wrong calculation,” he told me, “So I went to her and got that mark reduced.”
“Wonderful, son! It’s great to see your honesty!” I told him while patting his back. He was surprised, and asked, “But no one patted your back when you returned that ten rupees the shopkeeper had given you by mistake a few days back? Isn’t what I did in school today a normal behaviour?”
I was astonished at his response, especially given his tender age, and felt proud of what he did in school and how he explained it to me afterward. “Our kids are watching us, Vishal,” my wife told me. “Let’s set the right examples always.” I nodded my head in agreement.
Coming back to the key idea of this post i.e., how to teach kids about money, the advice is no different. If you wish to see your kids grow up into honest and responsible adults – financially or in any sphere of life – there is no alternative to showing them the way through your own examples.
You cannot be punting on stocks or splurging money to keep up with your friends and neighbours, and then expect your kids to respect money and develop the right saving and investing habits. You cannot be indulging in rash driving, abusing other drivers on the road, or not wearing the seatbelt, and then expect your kids to do otherwise.
In our recent Camp Millionaire money workshops for kids in Delhi and Mumbai, we came across a lot of smart young ones who knew a bit about compounding, needs vs wants, bad financial behaviour and other key ideas around money, saving and investing. What we realized was that these kids were ones whose parents are talking to them about these things at home. And that’s exactly the point I would like to drive home today.
You must talk about money and related subjects with your kids at home. Like it’s never too early to show the way to your kids on right, honest and kind behaviour, in the same way, getting them to learn – by setting the right precedents yourself – good financial habits early in life is important. Kids are exposed to these matters from a very young age, so why not help them understand it and develop healthy habits early on?
Like, a child under the age of five can be shown why it’s important to wait to buy something you want. The one between five and eight can be shown how it’s important to make choices about how to spend money. The one older than eight can be shown how the sooner you save, the faster your money can grow through compounding.
Consider this broad plan I am working on to teach my kids the several key ideas on money at different points in their lives…
This plan is not etched in stone and may change as per changing times. But I plan to follow it like I have done so far.
I hope this cheat-sheet also guides you in your effort to raise a financially responsible child.
Warren Buffett has said that one of your most important jobs in life is to raise your children well. You have no excuse to give up on this responsibility because that will largely determine how confident and responsible your kids become with money and other things in life as they grow up.
The best way to raise them well is to show them how to do it well yourself.
P.S. Watch with your kids the cartoon series titled Secret Millionaires Club where Warren Buffett (in his own voice) teaches kids the basic of good financial decision making and some of the basic lessons of starting a business.