Jim Cramer, host of CNBC’s “Mad Money” and Investing Club, says the biggest lesson he’s taught his own kids is to be self-reliant with money. Cramer has four grown children — including two daughters, one stepdaughter and one stepson — in their 20s and early 30s.
Despite his wealth, he expects his kids to have separate finances and to live within their means. That means he won’t buy stocks or otherwise make investing decisions on their behalf.
“Giving money to my own kids and then having them invest — bad idea,” says Cramer. He prefers to let his children make their own investment decisions with their own money, rather than getting a handout from him.
Without a personal stake in their investment, it won’t mean anything to them “if it’s not theirs,” he says.
Cramer brings up one of his daughters, who is a counselor that works with troubled youth, as an example. She makes a very low income, according to Cramer, but still invests the money she has, even if it’s less than a few shares at a time.
“It’s her own money. But holy cow, she’s done well,” he says.
Cramer’s philosophy of not giving too much is similar to that of the investing legend Warren Buffett, who plans to donate 99% of his fortune to charity, rather than passing it on to his kids. Buffett prefers to give his children “enough so that they can do anything, but not enough that they can do nothing.”
Cramer teaches his kids to focus on things that have meaning for them, aside from building up wealth: “Volunteer at a soup kitchen or donate money to a charity. This will teach you the true value of money.”
He also encourages his daughters to dedicate a percentage of their paycheck to philanthropy: “By doing so, you will see how giving doesn’t just affect the people you give to, but the giver, as well.”
To learn more about investing, you can join the CNBC Investing Club with Jim Cramer at a discounted rate.