Wealthy Leaders’ Financial Advice for Kids: Investing, Budgeting, and Inheritance
Sally Anscombe | Getty Images
When entrepreneur Eric Malka sold his company and became an investor, he had to completely change his thinking. Since then, he has learned many lessons that he now passes on to his children.
Founded in 1996 by Malka and his wife, Miriam Zaoui, The Art of Shaving – when he bought Proctor and gambling b 60 million dollars was reported In the year In 2009, Malka realized he had to teach himself.
“When an entrepreneur like me is lucky enough to run a liquidity event, then we’re faced with … managing the assets without proper training,” he told CNBC in a video call. Investors need to be patient and focus on long-term returns, while company founders often focus on short-term planning, an “almost opposite” mindset, Malka said.
He has taken courses on wealth management, read books on investing and now has a diversified portfolio of stocks, bonds, private equity and real estate, with 10% allocated to low-risk investments. In the year In 2014, he established Strategic Brand Investments, a private equity fund.
What you learn when you lose is more important than what you learn when you succeed.
Eric Malka
Co-founder and CEO, Strategic Brand Investments
Malka’s approach to teaching the children – aged 14 and 16 – about money was to help them learn from the ground up.
“One of the challenges I’ve had with my teenage kids early on is that they believe it’s too easy to make money by investing in social media and what they hear from their friends,” he said. His eldest son thought he could generate 20% monthly returns, which Malka described as “very alarming”. So he allowed Malka to invest a small portion of his savings, hoping it would give him a chance to study – and the boy lost 40% of his investment after trading currency futures.
“I hate to set my kid up for failure, but sometimes, you know, the lessons you learn when you fail are more valuable than the lessons you learn when you succeed,” Malka said.
It’s a point Gregory Wan, CEO of Singapore-based wealth platform Indus, concurs. He and his wife have eight, six and three children. He said it teaches them the importance of making mistakes when the problems seem big, even if they are small in reality. “The emotional muscle and humility required to be a good investor is something people have to develop on their own,” he said.
Teaching children how to invest
For Daisy Olarte de Canavos, co-founder of real estate company Flagship Luxury Group, teaching kids about money early is key.
She and her husband set aside “low-risk” funds for each of their three children, who are in middle school, to invest in select companies. “Our kids chose. Apple, Amazon, google And Alibaba. All but one had outstanding runs. As long as they keep their money in the market and are thoughtful in their approach, we’ll add to their nest egg every year,” she told CNBC in an email.
Olarte de Canavos says her experience in real estate investing has taught her the value of patience. “It has influenced my business by emphasizing a long-term strategy rather than quick profits,” she said. The mother of three describes her own investments in the stock market as “very conservative, to better manage the significant risk we have in our real estate business.”
Give them an allowance no later than first grade.
Dacey Olarte de Kanavos
President and Co-Founder, Flag Luxury Group
She suggests that kids explain why they want to buy certain stocks, because it “makes investing fun and an integral part of their learning,” she said.
Vann talks about investing with his young sons on their own terms. “I ask them: ‘How would you feel if we invested this $100 and it went down by $70 next year? ‘Would you rather spend $100 on a toy today or have it turn into $200 in 10 years, 16 years?’ “What’s surprising is that they’re very rational and always go for delayed gratification,” Vann told CNBC.
Van and his wife have an investment portfolio for their children, mostly made up of gifts they receive during holidays like Chinese New Year. “In terms of their long investment horizons, they’re in very diversified, multi-manager, low-cost stock portfolios,” Van said, and his kids show them the performance of their portfolios — positive or negative — when they ask.
Budgeting and saving for children
Age-appropriate advice is very important, Malka said. The focus now is on teaching the kids about budgeting by giving them a fixed monthly allowance.
At first, you know, they spend 10 days that they should have spent 30 days… Now I’ve been doing this for eight months or nine months, now they’re really mastering it, and I think that’s a skill they don’t realize they’re learning,” he said. He recommended the book “Raising Financially Competent Children.”
“Give them an allowance not later than first grade,” says Olarte de Canavos. “The purpose of the grant is to allow them to make their own decisions about money and learn to manage the problems that come with their choices,” she told CNBC. “As they get older, teach them about savings, the concept of interest and the difference between good and bad debt,” she says.
For Roshni Mahtani Cheung, CEO and founder of media company The Parentin, long-term thinking is important. She and her husband opened a fixed deposit account for their eight-year-old daughter’s Chinese New Year earnings, and she received a gold coin on Diwali. “My goal is for her to be financially savvy, confident and ready to make her own decisions,” Mahtani Cheng told CNBC in an email.
Talking to children about inheritance
Advisor Network Tiger 21 Concerns of the wealthy are how and when to talk to their children about inheritance. Tiger 21 founder and chairman Michael Sonnenfeldt said in an email to CNBC, “They are very concerned about their children leading independent and productive lives and do not want them to be distracted or deprived of knowledge about the wealth they will inherit.”
About 70% of the network’s members want to wait until their children are in their 30s and have established careers with details about what they will inherit and when, Sonnefeld says. “However, about 30% of members want to work with their children in their late teens or early 20s to teach them to be responsible stewards of the wealth they inherit,” he said. Both approaches are valid, he added.
“I suggest that parents encourage clear values-based discussions about money and investing,” Sonnenfeldt said.