Teaching children about money doesn’t just mean giving them an allowance and telling them to save. It’s about building a strong foundation of financial literacy that equips them to make informed decisions throughout their lives.
Experts agree that 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.
The real challenge, experts say, lies in transitioning from an entrepreneurial mindset to an investor’s long-term perspective. Eric Malka, co-founder of The Art of Shaving, learned this firsthand when his company was acquired by Procter & Gamble in 2009. “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.”
Malka’s experience has shaped his approach to teaching his sons about investing. He witnessed their tendency to view it as a quick path to wealth, influenced by social media trends and peer pressure. To illustrate the importance of learning through experience, even if it means making mistakes, he allowed his older son to invest a portion of his savings in currency futures. The result was a 40% loss, a harsh but valuable lesson reinforced by the adage, “The lessons learned when you lose are more valuable than the ones when you succeed.”
Other parents are taking a similar approach. 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, champions early exposure to financial concepts. She and her husband actively involve their children in financial decision-making, teaching them about budgeting, saving, and investing from a young age.
Olarte de Kanavos believes in giving children an allowance no later than the first grade to allow them to learn to make their own decisions about money and the consequences that come with their choices.
Experts suggest that parents should start by allocating a small amount of children’s Chinese New Year gifts or Diwali bonuses into fixed-deposit accounts, while others suggest investing a portion in gold.
The key takeaway is that open communication and a values-driven approach are crucial. By fostering a culture of financial literacy at home, parents can empower their children to make informed decisions and build a secure financial future.