Though it seems simple, kids may have a hard time understanding this, as they tend to believe they need just about everything. Help them grasp the important concept early to encourage healthy money habits.
Needs vs. wants explained
Simply put, a need is something that is necessary for survival. A want is something that would be nice to have, but is not necessary for survival. Parents should note that needs may vary from person-to-person. For example, a photographer would consider a camera a need while a lawyer wouldn’t.
Though individual needs vary, there are some that are universal. We all need air, water, food, exercise, and other necessities. While not all cost money, most do.
While children may have a basic understanding of what needs and wants are, they don’t always realize when they’re overdoing it. Eating out isn’t a need simply because food is a need. An expensive vehicle isn’t a need just because transportation is a need.
If parents are able to instill this lesson in their children, it can immensely help with budgeting as they transition into adulthood.
Books can be a great teaching tool for young children because they’re able to see situations through a character’s lens. Lisa Bullard’s Lily Learns about Wants and Needs covers the concepts of needs and wants well.
Lily, the main character, wants a new bike, raincoat, and ice cream. With her dad’s help, she is able to understand she doesn’t need a new bike and though she needs a raincoat, she can purchase it on sale to have extra money for wants (ice cream). It’s a win-win.
Another opportunity to practice recognizing needs and wants is while shopping. Have your kids go through your shopping list and identify needs then wants. You can instead have them do this as you put items into your cart.
Discuss how you prioritize needs over wants. If unexpected or additional items are added, discuss whether or not other items have to be put back on the shelf. Even though it may not be the case, talk about why one may need to do that. Resources, after all, are finite.
Practice makes perfect
When your children are able to manage money on their own, consider allowing them to make their own choices. Give them a dollar amount, and then instruct them to purchase things they need. When they’re ready, review and discuss their selections.
Allow them to make mistakes and live with the consequence, but share your thoughts on what they could have done differently. If they’re under budget, consider allowing them to keep extra funds. This can help you begin another lesson: saving and setting goals.
Visit aplusfcu.org/balance to gain access to free resources covering a wide variety of topics, including Youth and Young Adults.