Planting the Seeds of Financial Wisdom: How Parents Can Teach Kids About Investing
Teaching children about money matters isn’t just about handing them allowance or instructing them too save.It’s about fostering a strong foundation of financial literacy that equips them to make informed decisions throughout their lives. This journey begins early, with parents playing a crucial role in guiding their children through the complexities of personal finance, especially when it comes to investing.
Entrepreneurs frequently enough find themselves facing a unique challenge when their ventures transition from startups to established businesses. Eric malka,co-founder of The art of Shaving,experienced this firsthand when Procter & Gamble acquired the company in 2009 for a reported $60 million. Malka realized he needed to adapt his mindset from an entrepreneurial one focused on short-term goals to an investor’s perspective centered on long-term growth.
“when an entrepreneur like me is lucky enough to have a liquidity event, then we’re faced … with managing assets without proper training,” Malka explained to CNBC.”Investors must focus on being patient and on long-term returns, whereas company founders often look at a short-term plan, almost an opposite mindset.” He honed his financial literacy through courses, books, and practical experience, eventually forming his own private equity fund, Strategic Brand Investments.
Malka’s own journey served as a valuable lesson for his sons, aged 14 and 16.He observed their tendency to view investing as a swift path to wealth, influenced by social media trends and peer pressure. When his older son confidently predicted a 20% monthly return on investment, Malka knew it was time for a reality check. To illustrate the importance of learning through experience, even if it means making mistakes, he allowed his son to invest a small portion of his savings in currency futures. The outcome was a 40% loss, a hard-earned lesson that reinforced the adage, “The lessons learned when you lose are more valuable than the ones when you succeed.”
This ideology resonates with other parents navigating the complex world of finance. Gregory Van, CEO of Singapore-based wealth platform Endowus, believes in the power of controlled mistakes. “The emotional muscle, and humility required to be a good investor is something that people need to develop on their own,” van emphasizes. He plans to teach his children the importance of understanding risk and embracing calculated mistakes in a safe environment.
Dayssi Olarte de Kanavos, president and co-founder of real estate company Flag Luxury group, believes that early exposure to financial concepts is key. She and her husband actively involve their children in financial decision-making, teaching them about budgeting, saving, and investing from a young age. By fostering an open and transparent approach to money matters, Olarte de Kanavos empowers her children to become financially responsible individuals.
The journey of financial education starts at home, with parents playing a vital role in shaping their children’s financial literacy. By incorporating these strategies and fostering an environment of open communication, parents can equip their children with the tools they need to navigate the world of finance confidently and responsibly.
Teaching children about investing from a young age can set them up for financial success later in life. This principle is echoed by Dayssi olarte de Kanavos,president and co-founder of Flag Luxury Group,who believes in instilling financial literacy in her children early on.Olarte de Kanavos gave each of her three children a sum of money to invest in the stock market during middle school. Their picks included companies like Apple, Amazon, Google, and Alibaba. “All but one had terrific runs,” she shared, emphasizing the importance of a long-term investment strategy. “As long as they kept their money in the market and continued to be thoughtful in their approach, we added every year to their nest egg.”
Her experience in real estate investing greatly influenced her approach to her children’s financial education. “It influenced my business approach by emphasizing long-term strategy over quick gains,” she explained. She stresses that her own investment approach is “very conservative” to manage the inherent risks associated with their real estate ventures.
Olarte de Kanavos recommends actively engaging children in the investment process. “Having them explain why they want to buy certain stocks can demystify investing and make it an exciting and integral part of their education,” she suggests.
Another proponent of early financial education is Van, who adopts a straightforward approach with his young children. “I ask them: ‘If we invest this $100 and it goes down by $70 next year, how will you feel?’ ‘Do you want to spend $100 today on a toy, or have it turn into $200 in 10 years when you are 16?'” he explains. van has found to his surprise that children frequently enough demonstrate remarkable rationality and a strong preference for delayed gratification.
Olarte de Kanavos underscores the importance of starting early, suggesting, “Give them an allowance no later than the first grade,” This approach allows children to learn about managing money and making responsible financial decisions from a tender age.
Teaching Kids About Money: From Budgeting to Inheritance
Raising financially responsible kids is a top priority for many parents.But where to begin? Experts offer a range of age-appropriate advice, from simple budgeting exercises to starting conversations about long-term investments and inheritance.
Many parents, like Malka, emphasize the importance of early financial literacy. He implements a monthly allowance, explaining that “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 months or nine months, now they’re really managing it properly, and I think that’s a skill they don’t realize they’re being taught.”
Financial advisor roshni Mahtani Cheung takes a long-term view, establishing a fixed-deposit account for her daughter’s Chinese New Year gifts and investing in gold for Diwali. “My goal is for her to grow up financially savvy, confident, and ready to make her own decisions,” she shared.
Olarte de Kanavos, another expert, stresses the value of allowing kids to make their own financial choices. “Give them an allowance no later than the first grade,” she advises. “The purpose of an allowance is to allow them to learn to make their own decisions about money and to manage the repercussions that come with their choices,” she told CNBC. As children mature, they can learn about saving, the concept of interest, and the difference between good and bad debt.
For families with significant wealth, the topic of inheritance often arises. Michael Sonnenfeldt, founder and chairman of advisory network Tiger 21, observes that many wealthy parents prioritize their children’s independence.“They are most concerned about their kids leading autonomous productive lives and don’t want knowledge about the wealth they will inherit to distract them or take them off course,” he said.
Sonnenfeldt notes that Tiger 21 members are divided on when to discuss inheritance. While 70% prefer to wait until their children are close to 30 years old, 30% begin conversations in their late teens or early twenties to guide them in becoming responsible stewards of their future wealth.
Ultimately, Sonnenfeldt suggests that open, values-driven conversations about money and investing are key.By fostering a culture of financial literacy at home, parents can empower their children to make informed decisions and build a secure financial future.
What are some age-appropriate ways to teach children about budgeting and financial responsibility?
Teaching Kids About Money: From Budgeting to Inheritance
Raising financially responsible kids is a top priority for many parents.But where to begin? Experts offer a range of age-appropriate advice, from simple budgeting exercises to starting conversations about long-term investments and inheritance.
Many parents, like Eric Malka, emphasize the importance of early financial literacy.” “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 months or nine months, now they’re really managing it properly, and I think that’s a skill they don’t realize they’re being taught,”he explains.
Financial advisor Roshni Mahtani Cheung takes a long-term view, establishing a fixed-deposit account for her daughter’s Chinese New Year gifts and investing in gold for Diwali. “My goal is for her to grow up financially savvy, confident, and ready to make her own decisions,” she shared.
Dayssi Olarte de Kanavos,another expert,stresses the value of allowing kids to make their own financial choices. “give them an allowance no later than the first grade,” she advises. “the purpose of an allowance is to allow them to learn to make their own decisions about money and to manage the repercussions that come with their choices,” she told CNBC. As children mature, they can learn about saving, the concept of interest, and the difference between good and bad debt.
For families with important wealth, the topic of inheritance often arises. Michael Sonnenfeldt, founder and chairman of advisory network Tiger 21, observes that many wealthy parents prioritize their children’s independence.“They are most concerned about their kids leading autonomous productive lives and don’t want knowledge about the wealth they will inherit to distract them or take them off course,” he said.
Sonnenfeldt notes that Tiger 21 members are divided on when to discuss inheritance. While 70% prefer to wait until their children are close to 30 years old, 30% begin conversations in their late teens or early twenties to guide them in becoming responsible stewards of their future wealth.
Ultimately, Sonnenfeldt suggests that open, values-driven conversations about money and investing are key.by fostering a culture of financial literacy at home, parents can empower their children to make informed decisions and build a secure financial future.
