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Educating children about the value and consequences of money as early as possible can go a long way in preparing them for the real world.

In a country with a poor savings record such as South Africa, instilling lessons early about how to handle money and investing can make all the difference to the financial outcomes they achieve as adults - better equipping them to grow and accumulate wealth.

We may shy away from talking about money, but doing so can help to ensure our children are better able to grasp financial concepts and can avoid some of the costly mistakes many of us make from simply being unprepared to work with money.

Pocket money can be used as a tool for financial education. Decide when, how much and how often you will give pocket money and start small.

If you reward chores with pocket money, it is best to ensure you do so only for special jobs that go beyond regular household chores. This gives a sense of responsibility, and shows that some tasks are more valuable than others. It’s important for children to understand that money doesn’t often come easily and that more can be earned if you put in hard work.

It’s a good idea to negotiate guidelines around how much money should go into saving, spending and charity.

If you can teach your children to save first, proportionately to their pocket money income - or from a part-time job when they are older - you can demonstrate that even a little can go a long way, as the power of compounding takes effect. As a parent, you can instil the discipline and priority of saving in your child, which will benefit them in their adult life.

Pay pocket money on a specific date each month. This demonstrates that money isn’t available on tap and promotes patience. Your child will soon realise that money needs to last in between “paydays”.

It’s not always easy to know when to discuss money with your children, or what to tell them. Here are some tips for three different ages, from author Janet Bodnar’s Raising Money Smart Kids:

Five things five-year-olds need to know about money:

* You need money to buy things.

* Coins can be exchanged for other good stuff.

* The toys they see on TV won’t look as awesome or work as well at home.

* Saving money can be fun when they use it to buy something later.

* They will not get everything they ask for, and there is a difference between needs and wants.

Five things 10-year-olds need to know about money:

* They will have to pay for their own trading cards, movie tickets, snacks and other expenses out of their allowance.

* They will not get an advance on their allowance unless they can provide a valid motivation.

* They should be able to navigate a supermarket with a cart and a list.

* They should have a savings account and learn that although they can withdraw their money, it won’t be the same cash and coins they put in.

* They will not get everything they ask for.

Four things 16-year-olds need to know about money:

* They will have to pay for their own entertainment and clothing out of their allowance and earn extra money if they want to buy more.

* They should have a reasonable idea of the family’s finances and realistic expectations for university.

* They should save half of everything they earn from a job.

* They will not get everything they ask for - this is a timeless lesson to keep in mind.

A financially savvy child is better equipped to achieve a successfully independent future. It’s in your hands as a parent to educate your child about financial matters, and it is also in your own best interest to do so, as it will benefit you both financially in the end.

Ronald King is the head of strategic research and support at PSG Konsult.

PERSONAL FINANCE