We all learn about how to handle money from our parents. Maybe your parents passed along some sage financial advice that really has helped you maximise your money, or maybe you've learned exactly what not to do with your money from their example. Sometimes, knowing what not to do can be just as valuable.
Money decisions are personal, and whether we realise it or not, the way we're brought up thinking about money often influences what we do with it once we make it on our own.
So, if you're a parent, what money lesson should you teach your children? I'd like to share four which I feel should form the bedrock of their financial education.
Work and earnings
Children need to understand the relationship between work and earnings from a young age. If your kids are doing the work, pay them an appropriate allowance.
Rewards motivate children, and money is an attractive reward. Allowing them to take on chores for which they can get paid not only teaches them the value of hard work but helps them learn how to manage their money.
Children who understand the value of hard work learn to be responsible for what they produce. They also learn the satisfaction of working hard to build savings and achieve goals. If they don't do their work, don't pay them.
How debt works
You can demonstrate the concept of debt to younger children by advancing them small loans for things they want but can't afford.
Most banks say your monthly debt repayments should be no more than 10% to 20% of your monthly income. Use this as a guideline.
If your children misuse their allowance and ask for additional funds, draft a loan agreement with them and advance them no more than 20% of their monthly allowance.
In the agreement, state clearly when and how much should be paid until the loan is paid off.
Missing a payment should incur a penalty of 10% interest each time. This penalty may be deducted from their monthly allowance, thus reducing their future "income".
In this way, your children will that going into debt is based upon a promise to repay according to a timetable, with consequences for default.
Hopefully, this also teaches them that they will have to trim their expenses in the upcoming months if they intend to repay you on schedule - just like you have had to do, when paying off a debt of your own.
Saving for goals
To teach money management, delayed gratification and charity, encourage your child to divide their money into three piles - savings, spending and sharing.
Help your child develop savings targets - goals that are reachable, fun and defined by both you and your child. It may seem silly to save for a small toy, but the sense of achievement is worth it.
Using a clear container as a bank with a visible line for the goal can help them feel a sense of accomplishment as they watch the coins and notes stack up. This makes reaching goals exciting and fun!
Giving money and more
Create a charity jar and invite children to donate to it when you pay allowances. As the jar fills, decide as a family to whom the contents should be distributed. You may choose to feed the hungry, buy clothes for the homeless, or contribute to a charity.
You might also want to teach them that giving doesn't always have to involve money. They can give their time at the local church or charity or sign up for volunteer work. This will teach your children that charity is not only for emergencies and reaching out to others in need, it's a way of life.
• Luthuli is an independent financial adviser and founder of Luthuli Capital