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Entrepreneur Eric Malka had to completely change his mindset when he sold his company and became an investor. Since then he has learned many lessons that he now passes on to his children.
When The Art of Shaving — founded by Malka and his wife Miriam Zoe in 1996 — was purchased Procter & Gamble to $60 million was reported In 2009, Malka realized he needed to educate himself.
“When an entrepreneur like me is lucky enough to have a liquidity event, we are faced with… managing assets without proper training,” he told CNBC via video call. Malka said investors should focus on being patient and long-term returns, while company founders often look at a short-term plan, “almost the opposite mentality.”
He took courses on wealth management, read books on investing, and now has a diverse portfolio of stocks, bonds, private equity and real estate, with about 10% allocated to riskier investments. In 2014 he founded the private equity fund Strategic Brand Investments.
The lessons learned when you lose are more valuable than those when you succeed.
Eric Malka
Co-Founder and CEO, Strategic Brand Investments
When it comes to educating his children — sons ages 14 to 16 — about money, Malka's stance has been to help them learn from the ground up.
“One of the challenges I face with early teens is that they think it's so easy to make money investing through social media and through what they hear from friends,” he said. His eldest son thought he could generate a 20% monthly return, which Malka described as “very worrying.” So, Malka let him invest a small portion of his savings, hoping it would provide a learning opportunity — and his son lost 40% of that investment after trading currency futures.
“I hate setting up my child for failure, but sometimes, you know, the lessons learned when you lose are more valuable than those when you succeed,” Malka said.
It's a point that 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 is important to make mistakes when the risks seem large to them, even though they may be small in reality. “The emotional muscle and humility required to be a good investor is something people need to develop on their own,” he said.
Teaching children how to invest
For Dayssi Olarte de Kanavos, president and co-founder of real estate company Flag Luxury Group, teaching children early about money is key.
She and her husband set aside a “low-risk” amount of money for each of their three children in middle school for them to choose companies to invest in. “Our children chose applefor Amazonfor Google and Alibaba. All but one ran wonderfully. As long as they keep their money in the market and continue to be thoughtful about their approach, we will add every year to their nest egg,” she told CNBC via email.
Ollert De Canavos said her experience in real estate investing has taught her the value of patience. “I influenced my business approach by emphasizing long-term strategy over quick wins,” she said. The mother of three described her own stock market investments as “very conservative, in order to best manage the huge risks we experience in our real estate business.”
Give them an allowance no later than first grade.
Dayssi Olarte de Kanavos
President and Co-Founder, Luxury Seasons Group
She suggested that children explain why they want to buy certain stocks, because “it can demystify investing and make it an exciting, integral part of their education.”
Fan said he talks to his young children about investment trade-offs in their own words. “I ask them: 'If we invest this $100 and it goes down by $70 next year, how would you feel?' “Do you want to spend $100 today on a toy, or turn into $200 in 10 years when you're 16?” Fan told CNBC via email. “Surprisingly, they're very rational and always go for delayed gratification,” he said. .
Fan and his wife have investment portfolios for each of their children, mostly from gifts they received during holidays like Chinese New Year. “Given their long investment horizon, they're in very diversified, multi-school, low-cost stock portfolios,” Fan said, and he shows his kids how their portfolios are performing—positive or negative—whenever they ask.
Budget and save for children
Age-appropriate advice is very important, Malka said. His focus now is teaching his children about budgeting, and providing them with a fixed allowance monthly.
“Initially, you know, they'll spend in 10 days what they were supposed to spend in 30 days… Now I've been doing it for eight months or nine months, and now they're managing it properly, and I think that's a skill they don't realize they're taught.” “. He recommended the book “Raising Kids Financially Fit” by Jolene Godfrey, which offers advice by age group.
“Give them an allowance no later than the first grade,” is Olarte de Kanavos' suggestion. “The purpose of the allowance is to allow them to learn to make their own decisions about money and manage the repercussions that come with their choices,” she told CNBC. “As they get older, teach them about saving, the concept of paying attention, and the difference between good and bad debt,” she said.
For Roshni Mahtani Cheung, CEO and founder of Media The Penterinc, long-term thinking is important. She and her husband open a fixed account for their eight-year-old daughter for the money she receives at Chinese New Year, and on Diwali she receives a gold coin. “My goal is for her to grow up financially smart, confident, and ready to make her own decisions,” Mahtani Cheung told CNBC via email.
Talk to children about their inheritance
A concern for wealthy members of the Tiger 21 advisory network is how and when they talk to their children about their inheritance. “They are more concerned about their children living independent, fruitful lives and don't want knowledge of the wealth they will inherit to distract or throw them off course,” Tiger 21 founder and president Michael Sonnenfeld said in an email to CNBC.
Sonnenfeldt said about 70% of the network's members are willing to wait until their children are close to 30 and have created posts detailing what they might inherit — and when. “However, about 30% of members want to start working with their children in their late teens or early twenties to educate them to become responsible designers of the wealth they will inherit,” he said. He added that both approaches are valid.
“I suggest that parents encourage open, values-based conversations about money and investing,” Sonnenfeldt said.
