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Warren Buffett on the Best Way to Build Children's Financial Skills

- By Rupert Hargreaves

At the 2010 annual meeting of Berkshire Hathaway (BRK-A)(BRK-B) shareholders, during the question-and-answer session with Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio), one shareholder asked the duo if they could share some advice they might give to children on how to prepare for a successful investment career.


Start early

Buffett responded to this question by saying that he believes it is vital for children to get good financial habits early on in life, and then carry them on. Building these foundations will ensure you do not make mistakes later in life, where the repercussions could be more significant and damaging to your wealth:


"I really do believe that getting good financial habits --other kinds of habits, too, but what I'm thinking about here is primarily financial habits --getting those early in life is enormously important.

I mean, Charlie and I were probably lucky that we grew up in households where we were getting all kinds of unspoken lessons, even, in terms of how to handle our life, but in particular, how to handle finances."



Buffett went on to say that Benjamin Franklin was teaching these lessons many years ago, and it makes a lot of sense to replicate his strategy.

Furthermore, the Oracle of Omaha believes building a strong foundation of financial habits early on in life is more important than advanced degrees and graduate school, probably because it is harder to break down and rebuild already established and ingrained ideas about finance than it is to build them up from the beginning. Specifically, he said:


"And I think that's about what you should be doing. I don't think --I think it's much more important to have good learning at the elementary level than, frankly, to have it in terms of advanced degrees and graduate schools."



Munger added that he believes one of the greatest educational institutions in America is McDonald's (MCD) because it teaches employees the benefits of discipline and financial management from the very beginning. He said the fast-food restaurant chain hires a lot of people that are "quite marginal" at the very start of their working career and they learn to show up on time for work and a lot of them go on to employment in higher-level jobs.

"They've had an enormous constructive effect about educating into responsibility a lot of people who were threatened with not making it," he concluded.

On this point, Buffett's added his own view, saying he learned a lot from the paper manager at the Washington Times Herald, John Daley, when he was working for the company as a newspaper delivery boy at the young age of 14 years old.

Buffett said he was "lucky" to run into this man at the beginning of his career because he taught him some important lessons in a "very enjoyable manner." He added that Daley wasn't preaching to him, he just told him: "I'd do better if I did this and that, and it worked."

I've always been amazed at the way Buffett and Munger have been able to translate what could be construed as relatively complex advice into easy to understand language. This piece of advice is no exception. Buffett clearly said the best lessons in life are those you learn early on in your career and they don't have to be overly complicated. You don't have to spend hundreds of thousands of dollars on a top-quality college education either. Some of the best lessons in life are the simplest and don't cost the world.

Disclosure: The author owns shares of Berkshire Hathaway.

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This article first appeared on GuruFocus.