2008: What's Buffett's advice for kids on saving money?

AUDIENCE MEMBER: Good morning. My name is Tim Fam (PH). I’m from Austin, Texas.

For my children, I would like to hear from both of you as far as the temptation to keeping up with the Joneses.

And can you give them advice that they can live by with respect to frugality, debt, and work ethic?

WARREN BUFFETT: Yeah. Just tell them to keep up with the Buffetts. (Laughter)

Well, Charlie and I have always been big fans of living within your income, and if you do that, you’ll have a whole lot more income later on.

And, you know, it — I think they will, to a considerable extent, not a perfect extent, they will follow the example of their parents.

I mean, if their parents are coveting, you know, every possession of their neighbor, you know, or trying to figure out ways to increase their cost of living without necessarily their standard of living, the kids are likely to pick up on it.

But now you can get the reverse effect. If you get too tough with them, they go crazy later on. (Laughs)

But the — it’s — people make that election.

Incidentally, there are people — there are plenty of people that I don’t advise to save.

I mean, the real — if you’re struggling along and making a reasonable income and you have a job with a 401(k) being put aside for you, and you have Social Security, who’s to say whether it’s better to defer a dollar of expenditure on your family on a trip to Disneyland or something that they’ll get enormous enjoyment out of so that when you’re 75 you can have a, you know, 30-foot boat instead of a 20-foot boat?

I mean, there are choices and there are advantages to spending money in various forms for your family when it’s young, and giving them various forms of enjoyment or education or whatever it may be.

So I don’t — I don’t advocate — I may practice — but I don’t advocate extreme frugality.

The — and I don’t say that it’s always better to be saving 10 percent of your income instead of 5 percent of your income.

I think it’s crazy to be spending 105 percent of your income, and I think that leads to all kinds of problems, and I get letters from people every day that have experienced those problems.

But, you know, in the end you want to have an internal score card. I mean, you are not a better person or a worse person because you live a different kind of life than your neighbor. Live a life that, you know, is true to yourself.

Charlie?

CHARLIE MUNGER: Yeah. It’s obviously the best method to train your children to provide the proper example.

(A person in the audience is shouting)

WARREN BUFFETT: I think we’re hearing a child that didn’t get that advice. (Laughter)

CHARLIE MUNGER: But of course, even if you do provide the proper example, it’s likely not to work —

WARREN BUFFETT: It’s noon.

CHARLIE MUNGER: — some of the time anyway.

WARREN BUFFETT: It’s noon now. We’ll take about a 30 to 40-minute break. We’ll come back. Some of those who are in the other room — we always have some openings here after lunch so you might be able to move into the main room.

We’ll reconvene, we’ll say, at 12:45. We’ll go to 3 o’clock.