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1. Live within your means

Children learn from watching their parents. Spending extravagantly on overseas trips, electronics and expensive cars does not seem justifiable if parents are struggling to pay school fees and debts. Encourage your kids to save for something special.

2. Instil a culture of saving

By giving your children everything they want, you are allowing for instant gratification, which if left unchecked, could lead into a culture of debt as an adult. Children need to understand the concept of saving for something important to them. For most families, this is done by  giving a monthly allowance. You can even go one step further as they get older and give them an appropriate monthly budget for clothes, toiletries and entertainment. If they spend all their cash in the first week, they will have to deal with the consequences of having nothing left for the rest of the month.

3. No get-rich-quick shortcuts

Children need to understand that hard work pays off. If they want financial freedom as an adult, it starts with high grades, which allows for further studies and hopefully an entrance into the job market.

4. Financial independence

Children need to learn that life does not come cheap and they need to earn an income that covers their needs and also develop a culture of saving from their first pay check. This will allow for non-dependence on others for money. This will be far less of an issue, if one has learnt the importance and necessity of being financially independent from a young age.

5. Understand the financial decision making process

Most children are excluded from conversations when it comes to buying cars, houses and items with a large capital outlay. For example, on purchasing a car, it is not only the initial cost of the car that is important, it is average fuel consumption, the cost of insurance, the cost of maintenance etc. Children will never have the advantage of this knowledge, unless you expose them to your decision making process.

Kerry Sutherland is Alexander Forbes financial planning consultants senior wealth manager.

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