Wealthy leaders on financial advice for children: investing, budgeting and inheritance

Entrepreneur Eric Malka had to completely change his attitude 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 bought by Procter & Gamble Down a reported $60 million in 2009, Malka realized that he needed to further his education.

“When a trader like me is lucky enough to experience a liquidity event, we are faced with… asset management without proper training,” he told CNBC on a video call. Investors need to focus on patience and long-term returns, while company founders often look at the short-term plan, which is “almost the opposite” mindset, Malka said.

He took wealth management courses, read books on investing, and now has a diversified portfolio of stocks, bonds, private equity and real estate, of which about 10% is allocated to riskier investments. In 2014, he founded the private equity fund Strategic Brand Investments.

When it comes to educating his children – sons aged 14 and 16 – about money, Malka has tried to help them learn from the basics.

“One of the challenges I had early on with my teenagers was that they believed it was very easy to make money investing through social media and what they heard from their friends,” he said. His older son thought he could generate a 20% monthly return, which Malka described as “very disturbing.” So Malka allowed him to invest a small portion of his savings, hoping it would be a learning opportunity – and his son lost 40% of that investment after trading currency futures.

“I hate to set my child up for failure, but sometimes, you know, the lessons you learn when you lose are more valuable than those when you succeed,” Malka said.

This is 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 the importance of making mistakes when the stakes seem high when in reality they may be low. “The emotional strength and humility required of a good investor is something people need to develop for themselves,” he said.

She and her husband gave a “low-risk” sum of money to each of their three middle school-aged children so they could choose which companies to invest in. “Our children have chosen Apple, Amazon, Google AND Alibaba. All but one had great runs. As long as they kept their money in the market and acted prudent, we added them to the budget every year,” she told CNBC by email.

Olarte de Kanavos said her experience investing in real estate taught her the importance of patience. “It influenced my business approach, emphasizing long-term strategy over quick profits,” she said. The mother of three described her stock market investments as “very conservative to best manage the enormous risk we take in the real estate industry.”

She 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,” she said.

Van said he talks to his young children about the trade-offs of investing on their own terms. “I ask them, 'If we invest this $100 and next year the price 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 at age 16 in 10 years?” 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, consisting mainly of gifts they received on holidays such as Chinese New Year. “Given their long investment horizon, they have very diversified, low-cost stock portfolios with multiple managers,” Van said, and he shows his children the performance of their portfolios – positive or negative – whenever they ask.