I just started reading a biography of Charles Munger, Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger by Janet Lowe, originally published in 2000.
Charles Munger is best known as Warren Buffett’s long-time friend, business partner, and vice-Chairman of Berkshire Hathaway. I find him fascinating on many levels – as a thinker, investor, philanthropist, and even philosopher. One of my favorite tips from him is to Work For Yourself An Hour Each Day, something I found in Warren Buffett’s biography The Snowball.
Here’s a memorable quote from the book dealing with his childhood:
Like Warren Buffett, Munger inherited no wealth. […]
“While no real money came down, my family gave me a good education and a marvelous example of how people should behave, and in the end that was more valuable than money,” explained Munger. “Being surrounded by the right values from the beginning is an immense treasure. Warren had that. It even has a financial advantage.”
Right now, there is a lot of focus on teaching “financial literacy” – which is good – but if you’re a parent of young children I feel that you have to think differently. It’s not critical to give your kid some fancy allowance iPhone app or online savings account to teach them how to manage money. What you should really be conscious of is how you act around them. Positive character traits like self-discipline, being dependable (keeping your promises), and frugality (not being wasteful) are often best taught by example. Watching you and learning such traits will help them to avoid credit card debt more than showing them how APR works. If only I could just buy them a book or something. 😉
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You might also find this recent short blog post interesting:
5 Lessons in Contentment from Warren Buffett and Charlie Munger
http://zenhabits.net/buffett/
I agree. Leading by example is by far the most important and effective lesson. I am hoping I could do that for my girl and that she would grow up to be a well-rounded person. Something else I’m keeping in mind for upbringing is this popular proverb:
“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”
With a little one on the way, I’ve been thinking about how to teach him to good with money. When my wife and I see spoiled kids with the latest tech gadgets and trendiest clothes, yet still seem unsatisfied, it drives us nuts. I definitely agree that parents are role models, and they learn by example. If the parent always has to keep up with the Joneses, the child will think the same way.
The hardest part of teaching children about money when you have financial means is what I called the different types of affordability.
When I was a kid, there were a lot of things that my parents said we couldn’t afford, and that was it, as far as I could see, we couldn’t. For me now, can I afford a Ferrari? No. Can I afford a Mercedes? Technically yes, but I feel there are better uses (usually no use of it at all) for the money it would cost me over what a Honda would. The kids know from the neighborhood we live in, the cars we have, etc. that we can afford to get them an Ipod Touch just like their friends, so it is a more subtle lesson to be learned that the Sansa MP3 player works just as well for music and costs a fraction of what the Touch does.
I thought the First National Bank of Dad book by David Owen had good ideas.
I think setting an example is the best path for every aspect of life, not just financial issues.