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Entrepreneur Eric Malka had to completely change his way of thinking 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 Myriam Zaoui in 1996, was purchased by Procter & Gamble for about $60 million reported In 2009, Malka realized she needed to educate herself.
“When an entrepreneur like me is lucky enough to have a liquidity event, then we are faced with… managing assets without proper training,” he told CNBC via video call. Investors should focus on patience and long-term profitability, while business founders tend to look at a short-term plan, “almost the opposite” mindset, Malka said.
He took courses on wealth management, read books on investing, 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 the private equity fund Strategic Brand Investments.
The lessons learned when you lose are more valuable than those learned when you win.
Eric Malka
Co-founder and CEO of Strategic Brand Investments
When it comes to educating her children (ages 14 and 16) about money, Malka’s attitude has been to help them learn from the ground up.
“One of the challenges I faced with my teenagers early on is their belief that it’s very easy to make money investing through social media and what they hear from their friends,” he said. His eldest son thought he could generate a 20% monthly return, which Malka described as “very worrying.” So Malka allowed him to invest a small portion of his savings, hoping it would provide him with an opportunity to learn, and his son lost 40% of that investment after trading currency futures.
“I hate setting my son up for failure, but sometimes, you know, the lessons you learn when you lose are more valuable than the lessons you learn 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 it will teach them that it is important to make mistakes when the stakes seem high, even though they may actually be low. “The emotional strength and humility necessary to be a good investor is something that people need to develop for themselves,” he said.
Teach children to invest
For Dayssi Olarte de Kanavos, president and co-founder of the real estate company Flag Luxury Group, educating children early about money is key.
She and her husband allocated a “low-risk” sum of money to each of their three children in high school to choose companies to invest in. “Our children chose Apple, Amazon, Google and Alibaba. All but one had great careers. As long as they kept their money in the market and remained thoughtful in their approach, we added to their savings every year,” he told CNBC via email.
Kanavos’ Olarte said his experience in real estate investing taught him the value of patience. “It influenced my approach to business by emphasizing long-term strategy over quick profits,” he said. The mother of three described her own investments in the stock market as “very conservative, to better manage the enormous risks we take in our real estate business.”
Give them an allowance no later than first grade.
Dacey Olarte from Kanavos
President and co-founder of Flag Luxury Group
He suggested that children explain why they want to buy certain stocks, because “it can demystify investing and make it an exciting and integral part of their education,” he said.
Van said he talks to his young children about the pros and cons of investing on their own terms. “I ask them, ‘If we invest this $100 and next year it goes down $70, how will you feel?’ ‘Do you want to spend $100 today on a toy, or turn it into $200 in 10 years when you’re 16?'” Van told CNBC via email. “Surprisingly, they are very rational and always choose to delay gratification,” he said.
Van and his wife have investment portfolios for each of their children, mostly made up of gifts they received during holidays like Chinese New Year. “Given their long investment horizon, they are in low-cost, highly diversified, multi-manager stock portfolios,” Van said, and he shows his children the performance of their portfolios, positive or negative, whenever he tells them. they ask.
Budgeting and saving for children
Age-appropriate advice is very important, Malka said. Your goal now is to teach your children how to budget by providing them with a fixed monthly allowance.
“In the beginning, you know, they were spending in 10 days what they were supposed to spend in 30 days… now I’ve been doing this for eight or nine months, now they’re actually managing it properly, and I think that’s a skill that they don’t they realize that they are being taught,” he said. She recommended the book “Raising Financially Fit Kids,” by Joline Godfrey, which offers advice by age group.
“Give them an allowance no later than first grade,” suggests Olarte de Kanavos. “The purpose of an allowance is to allow them to learn to make their own decisions about money and manage the repercussions that come with their decisions,” he told CNBC. “As they get older, teach them about saving, the concept of interest and the difference between good and bad debt,” he said.
For Roshni Mahtani Cheung, CEO and founder of media company The Parentinc, long-term thinking is important. She and her husband opened a fixed deposit account for their eight-year-old daughter with the money she receives on Chinese New Year, and on Diwali she receives a gold coin. “My goal is for her to grow up financially literate, 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 Tiger 21 advisory network is how and when to talk to their children about their inheritance. “What they are most concerned about is that their children lead productive independent lives and do not want knowledge about the wealth they will inherit to distract them or derail them,” Tiger 21 founder and president Michael Sonnenfeldt said in an email. to CNBC.
About 70% of network members want to wait until their children are in their late 30s and have established careers to detail what they might inherit and when, Sonnenfeldt said. “However, about 30% of members want to start working with their children in their late teens or early 20s to teach them to become responsible stewards of the wealth they will inherit,” he said. Both approaches are valid, he added.
“I suggest that parents encourage open, values-based conversations about money and investments,” Sonnenfeldt said.
