Last Nov. 25, Warren Buffett announced that he would donate a substantial portion of the shares he owned in Berkshire Hathaway to his four family foundations.
In his announcement, he included a letter which contained some important personal finance lessons that we can apply to our own situation.
One of my favorites is his comment that hugely wealthy parents should only leave their children enough so they can do anything but not enough that they can do nothing.
Despite being one of the richest men in the world, Buffett shared that his children only received $10 million each when his wife died. Although $10 million is a lot of money, it’s less than 1% of his wife’s estate.
I am not hugely wealthy, nor do I have $10 million. However, Buffett’s comment about just giving our children enough made me reflect on the importance of also making our children resilient.
Many of us want to make sure that our children will be financially secure by the time we pass away. While there is nothing wrong with this, sometimes we go overboard in making sure that this goal is met.
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For example, sometimes my husband and I are guilty of overindulging our children.
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Warren Buffett’s comment reminded me that we should also allow our children to go through difficulties so that they will become resilient and learn how to survive comfortably with less. Aside from letting them know that they shouldn’t expect much in terms of inheritance, this could mean limiting their allowance, allowing them to commute to school when there is no car available, and saying “no” to their request to buy nice and expensive things like the latest top of the line gadgets.
Another thing that we are guilty of (especially if you are Filipino Chinese like me) is thinking that we need to build a successful business so that our children will eventually have a steady source of income and the bragging rights of being their own boss.
Although there is nothing wrong with building a successful business, passing it on to our children should not be a priority. This is because there’s no guarantee that our children will want to run our business. In fact, they might not be equipped to run the business properly. If that is the case, they may end up running our business to the ground. This would put them in a worse position, especially if they were raised to think that they do not have to worry about money because they have a business that will take care of them.
Another personal finance lesson Warren Buffett shared is the importance of being grateful and learning to give back.
In his comments, Warren Buffett acknowledged the role of luck in making him wealthy—being born in the US as a white male in 1930 and living long enough to enjoy the power compounding.
However, he recognized that not everyone is as lucky as he is. Because of this, Buffett and his family are focused on giving back so that others who were given a very short straw at birth would have a better chance at gaining wealth.
Learning how to be grateful is very important. We cannot be truly happy unless we are grateful for what we have. In fact, many people who are rich are unhappy because they constantly compare themselves to others who have something that they don’t.
Meanwhile, giving back is a natural outcome of being grateful. It is also very fulfilling. For example, in my company COL Financial, we believe that everyone deserves to be rich. This is why we actively educate Filipinos on personal finance and the stock market.
Helping Filipinos better manage their hard-earned money is one of the greatest fulfillments of my career as an analyst. In fact, this is one of the reasons why I have stayed as an analyst despite the availability of other higher paying jobs.
Finally, Warren Buffett shared the importance of learning how to say no.
People who are wealthy will always be approached by friends, family and others seeking help. Although giving back is important, there is a limit as to how much we can give. Because of that, we need to learn how to say no, even if it is difficult or unpleasant.
To make it easier for his children to say no, Buffett’s foundations have a “unanimous decision” provision which states that unless all his three children agree, the foundations cannot distribute funds to grant seekers.
Although most of us are not as rich as Buffett, we can also benefit from having an accountability partner to help us say no to requests for help. That person can be our spouse, our sibling, or someone who shares our values and understands that while we want to be generous, our resources are limited. Our accountability partner can also help us decide who we should or should not help which is also a difficult task.
Warren Buffett ended his letter by saying that his children spend more time directly helping others than he has and are financially comfortable but not preoccupied with wealth. Because of that, his late wife would be proud of them and so is he.
As a parent, I’d be happier to have children who grow up to become productive citizens with good values rather than to have children who become very rich but are dishonest and greedy. INQ
