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Entrepreneur Eric Malka had to completely change his mindset after selling his company and becoming an investor. Since then, he has learned many lessons that he is now passing on to his children.
The Art of Shaving, founded by Malka and his wife Myriam Zaoui in 1996, is acquired Procter & Gamble for Reportedly worth $60 million In 2009, Malka realized he needed to educate himself.
“When entrepreneurs like me are lucky enough to experience a liquidity event, we are faced with … managing assets without proper training,” Malka said to investors. There must be a focus on patience and long-term rewards, while company founders often focus on short-term plans, an “almost opposite” mentality.
He took wealth management courses, read investment books, and now has a diversified portfolio of stocks, bonds, private equity and real estate, with about 10% allocated to riskier investments. In 2014, he founded private equity fund Strategic Brand Investments.
Lessons learned when you fail are more valuable than lessons learned when you succeed.
Eric Malka
Co-Founder and CEO, Strategic Brand Investments
When it comes to educating his children (sons, 14 and 16) about money, Malka’s approach is to help them learn from the ground up.
“One of the challenges I faced as a teenager was that they believed it was easy to make money by investing through social media and what they heard from friends,” he said. His eldest son believed he could earn a 20 percent return every month, Malka called this “very concerning.” So Malka asked him to invest a small portion of his savings, hoping it would provide an opportunity to learn—and his son lost 40% of his investment after trading currency futures.
“I hate to subject my kids to failure, but sometimes, you know, the lessons learned in failure are more valuable than the lessons learned in success,” Malka said.
This resonates with Gregory Van, CEO of Singapore-based wealth platform Endowus. He and his wife have children aged eight, six and three. He said he would teach them that it’s important to make mistakes when the risks seem big to them but may actually be small. “The emotional strength and humility required to be a good investor is something people need to develop on their own,” he said.
Teach children how to invest
For Dayssi Olarte de Kanavos, president and co-founder of real estate company Flag Luxury Group, educating children about money early is key.
She and her husband gave each of their three middle-school children a “low-risk” sum of money and let them choose companies to invest in. “Our children choose apple, Amazon, Google and Alibaba. All but one ran well. As long as they keep their money in the market and continue to be thoughtful, we can grow their reserves every year,” she told CNBC via email.
Olarte de Kanavos said her real estate investing experience taught her the value of patience. “It influenced my approach to business by emphasizing long-term strategies rather than quick gains,” she says. The mother-of-three describes her investments in the stock market as “very conservative in order to best manage the huge risks we take on in our real estate business”.
Give them an allowance before first grade at the latest.
Darcy Aulat de Carnavos
President and Co-Founder of Flag Luxury Group
She recommends having children explain why they want to buy certain stocks, as this “can demystify investing and make it an exciting and integral part of their education,” she says.
Pham said he talks to his young children about the trade-offs of investing on their own terms. “I asked them: ‘How would you feel if we invested this $100 and next year it dropped by $70?’ “Would you rather spend $100 on a toy today, or 10 years from now when you’re 16? Becomes $200? “, Van told CNBC via email. “Surprisingly, they are very rational and always pursue delayed gratification,” he said.
Fan and his wife have portfolios for each of their children, most of which consist of gifts they receive during holidays such as Chinese New Year. “Their stock portfolio is very diversified, multi-manager, low-cost, given their long investment horizon,” Fan said. He shows the kids how their portfolio is performing every time they ask — —either positive or negative.
Budgeting and Saving for Children
Malka said age-appropriate advice is important. His focus now is teaching his children how to budget and provide them with a fixed allowance each month.
“In the beginning, you know, they would spend in 10 days what they were supposed to spend in 30 days… Now I’ve been doing this for eight or nine months and now they’re managing it really well, I think. They don’t realize they’re learning the skill,” he said. He recommends the book Raising Financially Fit Kids by Joline Godfrey, which provides advice by age group.
Olat de Canavous’s advice: “Give them an allowance no later than first grade.” She told CNBC: “The purpose of the allowance is to teach them to make their own decisions about money and manage their money.” Choices Make a Difference.” “As they get older, teach them the concept of savings, interest, and the difference between good debt and bad debt,” she says.
For Roshni Mahtani Cheung, CEO and founder of media company The Parentinc, thinking long-term is important. She and her husband opened a fixed deposit account for their eight-year-old daughter with money they received during the Chinese New Year, and she received a gold coin on Diwali. “My goal is for her to grow up to be financially savvy, confident, and ready to make her own decisions,” Mahtani Cheung told CNBC via email.
Talk to children about their heritage
One concern for wealthy members of the advice network Tiger 21 is how and when to talk to children about their heritage. “Their primary concern is that their children can live independent, productive lives and do not want to know what they will inherit,” Tiger 21 founder and chairman Michael Sonnenfeldt said in an email to CNBC. Wealth, thereby distracting them or taking them off track.”
About 70 percent of network members want to wait until their children are approaching 30 and have established careers before detailing what they might inherit and when, Sonnenfeldt said. “However, about 30 percent of members want to start working with children in their late teens or early 20s, teaching them to be responsible stewards of the wealth they will inherit,” he said. Both approaches are effective, he added.
“I recommend parents encourage open, values-driven conversations about money and investing,” Sonnenfeld says.
