John Lowe, the Money Doctor and father of three children, continues with his advice in this final part on what you should be teaching your children...

Read Teach your kids about money, the right way part 1 here and part 2 here.

Well done – you have taught your children about earning, saving and spending. Only four more disciplines left and your children will be well equipped to cope with their future financial issues as they arise.

“Neither a lender nor a borrower be”..but was Hamlet’s Polonius wrong? It is so important for them to understand borrowing principles …

Teach them about borrowing

I have to be careful on the subject of borrowing because I am inclined to start preaching. It is the curse of our age and teaching children the difference between good debt and bad debt is vital if they are to avoid the pitfalls of borrowing more than is sensible. The key things it is important for children to grasp include:

  • The terrible mistake of taking out loans to fund lifestyle.
  • The high cost of borrowing. The most expensive thing when you buy a house is not the house itself but the mortgage.
  • The concept that when we borrow we are, essentially, giving away our most valuable asset: our future income.
  • The idea that a credit card is not cool. It should really be called a ‘debt card’, because that’s what it is doing, getting people who don’t pay their balance in full each month into debt.

Borrowing money

Children need to understand that when you borrow money you have to pay it back (unless you are Joe Fields who still owes me two shillings from 1978 ... come on, Joe, do the decent thing); so it may be worth lending them money for this very reason - though not if you are going to let them off, of course.

Is it worth teaching them about credit limits? Yes and no. They ought to understand, I suppose, what they are and how they are linked to one’s worth. But, more crucially, they ought to understand that a high credit limit is not necessarily a benefit.

Let’s hope our children don’t emulate Oscar Wilde when he said “Anyone who lives within their means suffers from a lack of imagination”– restraint, dear child, restraint!

Teach them about sharing

When they put me in charge of the country’s school curriculum, one of the things I shall introduce is a module on sharing. This is what I will include:

  • It is important to society as a whole to share. Not just money but also time, materials and skills. It is especially important that we share with those who are less fortunate.
  • Giving is as much a pleasure, possibly more of a pleasure, than receiving.
  • Tax is basically society asking us to share what we earn with others.
  • How one shouldn’t always expect public recognition when one gives. It is often kinder and better to keep it to oneself.

With this sort of thinking, it can only be a matter of time before I get the job.

Sharing money

Teach them about interest, compound interest and percentages

If children had to learn about just three financial concepts, it should be these:

  • interest
  • compound interest
  • percentages.

There are many articles written previously and available copiously via the internet (Google the words).

Teach them that money won't make them happy

We’ve covered all the subjects in this article to such a degree elsewhere on this website that I haven’t felt the need to say much about any of them here. But there is a concept which I feel I should say more about and that is how money doesn’t bring happiness.

It is a complicated thing to explain because it is, basically, counterintuitive and also goes against everything which society teaches our children. This is how I got the concept across to my own children.

Money won't make you happy

First of all, I got them to think about all the good reasons why we would want more money, including:

  • Survival: How would we pay for food, somewhere to live or clothes, if we didn’t have money?
  • Improving our circumstances: For example, if we want an education or to buy our own home, we must have money.
  • Luxury items: Money pays for all sorts of things - from mobile telephones and meals out to holidays and home entertainment systems - that make life more pleasant.
  • Looking after others: We need money to support our families, to give to charity and to help other people.
  • A sense of security: It is human nature to worry about survival. Even wealthy people are sometimes concerned about it. Having plenty of money goes a long way towards making us feel more secure.
  • Respect: Society looks up to people with money. Life is much easier for them.
  • Power: Not only does money buy things, it buys influence. The richer you are, the easier it is to get your voice heard where it counts.

Second, I took them through the famous Mr. Micawber quotation from Charles Dickens’ David Copperfield:

Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.

Pointing out that if you spend more than you earn, even if it is only sixpence, the result is misery; whereas if you spend less than you earn, again, even if it is only sixpence, the result is happiness. The moral being that happiness isn’t necessarily to do with how much money you have but whether you live within your means.

Then I got them to think about all the things in life that are more important than money. Things that money can’t buy, such as:

  • Good health: There is no point in being wealthy if you can’t enjoy it, because of poor health.
  • Love: It goes without saying that no amount of cash will make people love you.
  •  Friendship: Anyone who likes you only because of your money isn’t a real friend.
  • Self-worth: Having money and all that it can buy won’t actually make you feel good about yourself. This comes from inside you.
  • Peace of mind: If you are worried about something, or suffer from depression, having a fat bank balance won’t make any difference.

Family

Finally, I urged them to strike a balance. We must have money to survive. It also makes all sorts of things possible, such as the ability to help other people or live somewhere nice or travel. But there are lots of very important needs - health, love, friendship and feeling good about ourselves, to name a few - that money can’t buy. And having too much money may actually make us bored and fed up.

So, when dealing with money, it is important to strike a balance between having enough and having too much. I am not saying they might not have accused me of lecturing them once or twice as I was putting this all across ... but I think they caught the main gist of what I was saying.

Keeping things balanced is a priority. I remember Jackie Mason’s quip in particular:

"So many people spend their health gaining wealth, and then have to spend their wealth to regain their health."

Enjoy your children.

John Lowe is a Personal Insolvency Practitioner & managing director of Providence Finance Services Ltd trading as Money Doctor, regulated by the Central Bank and based in Stillorgan Co Dublin. He is the author of Money Doctor 2017 (Gill Books).