1. It’s seriously never too early to learn
When Buffett says to start teaching financial skills early, he means early.
“Sometimes parents wait until their kids are in their teens before they start talking about managing money — when they could be starting when their kids are in preschool,” he told 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 play fun, educational board games with them, like Monopoly and Life, and explain that spending isn’t as easy as tapping that card everywhere you go. It takes hard work to earn money, so you shouldn’t spend frivolously.
2. Teach the value of saving — even $1
As soon as they’re old enough to understand, start teaching your kids how to prioritize saving over spending.
Buffett wastes no time teaching the children in his animated series Secret Millionaires Club about interest.
“Saving even a little bit of money on a regular basis pays off,” he says. “Instead of spending money on a soda, which you don’t really need, put it in savings, and it will make even more money for you by earning interest.”
But lessons from cartoons only go so far — your kids could use some hands-on experience to be better savers. You can get them their very own savings account and debit card.
You can use an app to assign chores, set up automatic deposits for their allowance and even deposit parent-provided interest. They’ll be able to see how much money they’re making and saving — but don’t worry, Greenlight gives you ultimate control over how much they can spend with the card and where.
3. Be a heroic role model
Your kids are going to pick up some of your habits — the good and the bad. Buffett credits his own father for showing him how to build the right habits.
“My dad was my greatest inspiration,” Buffett said in a 2013 interview with CNBC. “He was my hero when I was six and he is still my hero now. He is an inspiration to me in every way. What I learned at an early age from him was to have the right habits early.”
Want to be a hero parent? Inspire your kids by making smart financial decisions. That doesn’t mean you need to be an expert investor, but at least show your kids you know how to keep your house in order.
That means, first of all, eliminating any troublesome debt you’ve accumulated. If you’re struggling with high interest rates – the kind on credit cards, for example — consider a lower interest debt consolidation loan to roll all those payments into one.
4. Separate needs from wants
A tough early lesson for kids: You can’t have everything you want.
Before they can manage their money responsibly, you’ll need to teach them that there’s a significant difference between wants and needs.
In an interview with CNBC, Buffett suggests having your kids make a list of five or 10 things they’d like to purchase. Then, go through each item with them and mark whether it’s a need or a want and explain why.
When you do shop for the needs — or occasionally, the wants — show your kids they can make meaningful decisions at that stage, too. For example, not every store has the same prices. With a free browser extension, you can instantly scan for better prices at other sellers while you shop on Amazon, Target and more.
5. Get them started in the stock market
Buffett bought his very first stock at the age of 11, with three shares of oil company Cities Service at around $38 per share. He later sold it for a small profit of $2 a share, although he would’ve earned more if he waited out a bit longer — the stock shot up afterward to $200.
While most of us probably don’t start investing until later on in life, you can give your kids a head start by breaking down some stock market basics, like risks and rewards and profits and losses. Talk about trending market topics, like Gamestop, or their favorite brands and companies, and show them how the market works, so it’s more accessible to them.
You can even help them buy fractional shares of big-name companies they admire, like Nike and Apple, for as little as $1.
6. Fuel their entrepreneurial spirit
It didn’t take long for Buffett to start sharpening his business skills.
Long before Berkshire Hathaway, a six-year-old Buffett earned his first few cents selling sticks of gum in the neighborhood. Seeing an opportunity for even better margins, he moved on to purchasing six-packs of Coke for a quarter and selling the individual cans for a nickel each.
Encouraging your kids to find money-making opportunities will help them down the road. Even a lemonade stand will help teach lessons like problem solving, goal setting and salesmanship.
You might also consider building up some seed money for your child’s future ventures using an app that automatically invests "spare change" from everyday purchases.
Then, when your child becomes an adult, they'll be able to take over the account and use the lessons you've taught them to grow it even more.