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 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 on 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 makes a big difference

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. Even though she is still in school, she can find a summer job to earn some pocket money.

Then, get your child used to making simple choices. If they buy one thing 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, and sticking to the same choices until the impact is clear. For example, how is it that Child A saves enough money to buy a car in high school, while Child B doesn’t? The trick is that Child A chooses to drink the water that’s available instead of buying soda with every school lunch.

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

This is a famous quote from billionaire Buffett when discussing saving. 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 and put it in a jar before calculating what they will spend the rest on. Children will also realize that if they reduce their spending, 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 too different.

4. Distinguish between bad debt and good debt

At some point, your child may want to take out a loan to fund a business idea that has just come to mind. While Buffett says that no debt is a good thing, at least such investments for the future are worth supporting, as opposed to taking out a loan to spend money that is not rational.

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