- Bargaineering - http://www.bargaineering.com/articles -

Kids & Money: Teaching Needs vs. Wants

One of the most difficult concepts to teach children is the difference between needs and wants. However, this is an important money lesson to learn. In fact, it’s vital, since understanding the difference between needs and wants provides a foundation for successful finances.

As you prepare to teach your children this important lesson, it wouldn’t hurt to refresh your own understanding of the concepts related to needs vs. wants. After all, sometimes we, as adults, also forget to make the distinction.

Needs or Wants?

Determining the difference between needs and wants can be a little difficult for children to understand — especially younger children. However, you do need to help your kids learn the distinction between needs and wants. Some of the items that constitute needs include:

Help your child identify the items that fit into these categories. (For younger children, you can go through a magazine and cut out pictures and make two different collages: One of needs, and one of wants.) Good walking shoes, a bike or bus fare might fall into the category of transport to school. A warm jacket or coat falls into the category of adequate clothing. Talk about the items that your child needs to function properly at school, and to grow strong.

Then, discuss items that might be considered wants. While you might really enjoy items that qualify as wants, they are not things that you need for survival, nor are they items that your kids need to get to school, and to do well. Wants include:

Talk about how these things can be nice to have, but they aren’t necessary. It’s fun to eat candy, but it’s not nutritious food that can help you grow strong. It might be nice to have an expensive sweater, but a less expensive sweater will do the job — and cost much less. Discuss the importance of making sure needs are covered first. If there is money left for wants, then you can buy them. In some cases, there might be a little money left over, but not enough to buy what your child wants. In that situation, you can talk about saving up for things that they want. There are also plenty of online games [3] that can help teach your kids about money.

My son knows that there are some things that he needs to do with his money. The rest goes in a jar for him to spend as he pleases. If he wants something bigger, like a video game, he knows he should save his discretionary money. But he knows that needs need to be taken care of first.

Setting a Good Example

Of course, in order to be effective in teaching your children the difference between needs and wants, you need to set a good example. We have family discussions about what we should spend our money on. Our son sees that we spend money on food and gas for the car before we buy other items. He also watched as we saved up our “wants” money to have our driveway finished, before we decided to buy an iPad. Your kids have to see you prioritizing your spending if you expect them to learn lessons about distinguishing between needs and wants.

(Photo: Brenda Anderson [4])