Wealthy Leaders on Financial Advice for Kids: Investing, Budgeting and Inheritance

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 is now passing on to his children.

When The Art of Shaving — founded by Malka and his wife Myriam Zaoui in 1996 — bought Procter & Gamble for a reported $60 million In 2009, Malka realized that he had to get an education.

“When an entrepreneur like me is lucky enough to experience a liquidity event, then we’re faced with … managing assets without proper training,” he told CNBC via video call. Investors need to focus on patience and long-term returns, while company founders often look at short-term plans, “almost the opposite” of thinking, Malka said.

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 the private equity fund Strategic Brand Investments.

When it came to educating his children — sons, ages 14 and 16 — about money, Malka’s attitude was to help them learn from the ground up.

“One of the challenges I faced early on with my teenagers 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 older son thought he could make 20% monthly returns, which Malka described as “very worrying”. So Malka let him invest a small portion of her 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 kid up for failure, but sometimes, you know, the lessons learned when you lose are more valuable than the ones you learn when you succeed,” Malka said.

It’s a sentiment shared by Gregory Van, CEO of Singapore-based wealth platform Endowus. He and his wife have children aged eight, six and three. He said he will teach them the importance of making mistakes when the stakes seem high, even though in reality they may be small. “The emotional strength and humility needed to be a good investor is something people have to develop themselves,” he said.

She and her husband allocated a “low-risk” sum of money to each of their three children in high school to choose companies in which to invest. “Our children chose Apple, Amazon, Google and Alibaba. All but one had great rides. As long as they kept their money in the market and continued to be thoughtful in their approach, we added to their contribution every year,” she told CNBC via email.

Olarte de Kanavos said her experience in real estate investing has taught her the value of patience. “It 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, to best manage the huge risks we take in our real estate business.”

She suggested that 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 said.

Van said he talks to his young children about the trade-offs of investing on their terms. “I ask them, ‘If we invest this $100 and next year it drops by $70, how will you feel?’ “Do you want to spend $100 on a toy today or do you want it to turn into $200 in 10 years when you’re 16?” Van told CNBC via email. “Surprisingly, they are very rational and always seek delayed gratification,” he said.

Van and his wife have investment portfolios for each of their children, mostly made up of gifts they receive during holidays such as Chinese New Year. “Given their long investment horizon, they’re in very diversified, low-cost, multi-manager stock portfolios,” Van said, showing his children the performance of their portfolios — positive or negative — whenever asked.