4 principles of teaching children about money from billionaire Warren Buffett

Many parents often overlook or ignore teaching their children how to think about money. However, this is one of the important factors that affect their children's future success.

You can refer to the advice of financial knowledge master, billionaire Warren Buffett, to apply in raising children.

1. Build money management habits early

We try to teach our children many good habits in life, including being polite, kind and respectful to others, being punctual and studying hard. Money thinking should also be on this list, because it determines whether the child will be able to balance their spending and live comfortably with the money they earn.

According to Warren Buffett, habits are difficult to feel at first but will gradually be difficult to break. If your child has some bad habits related to money and you are not observant enough to realize or do not try to guide, later you will find it very difficult to change. Therefore, make a wise decision early instead of trying to save when it is too late.

2. Little by little, big becomes big.

First, teach your child basic financial concepts and help them feel happy with small achievements. For example, a 16-year-old girl can have her own savings account. Parents can act as advisors to give advice when needed. Although she is still in school, she can find a summer job to earn pocket money.

Then, you should get your child used to making simple choices. If they buy one now, they won’t have enough money to buy the more expensive one when they want it. Buffett believes the key to success is starting small, maintaining consistent choices until the impact is clear. For example, how is it that Child A can save enough money to buy a car in high school, while Child B can’t? The secret is that Child A chooses to drink the available water instead of buying soda with every school lunch.

3. Don't save what's left after spending, spend what's left after saving.

This is a famous quote from billionaire Buffett when discussing savings. To apply, you can teach your children to set a target amount of money, then plan to save and track spending. For example, every time they receive a certain amount of money, they can take a percentage to put into a jar before calculating what to spend the rest on. Children will also realize that if they reduce the need to spend, they will have more money to save.

Parents are the closest role models that children often want to imitate. Therefore, in daily life, you can show your children that parents do not spend money on unnecessary things, or choose some things that are cheaper but the quality is not much different.

4. Distinguish between bad debt and good debt

At some point, your child may want to take out a loan to finance a business idea that has just come to mind. While Buffett says no debt is inherently good, it is at least worth supporting such investments for the future, as opposed to taking out money to spend it unwisely.

It is the parents' job to discuss thoroughly, help children understand the difference between bad debt and good debt, to prevent the first bad step.