Kids as young as 4 years old can understand the difference between needs and wants
Needs versus wants is a simple money concept, but extremely powerful one. I have taught it to kindergartens, yet years ago I noticed that some of my adult clients were struggling with it. Why is it so hard for us to spend money smartly? We all know that we should spend money on needs first than on wants, but some people tend to do the opposite. I think this has to do with behavioral economics. We use shopping to deal with our emotional issues. Teaching kids needs versus wants is a great way to start teaching financial literacy lessons. You can explain to them that everything can be divided into needs and wants. Needs are things that we need for survival such as water. You can tell them that wants are things that we do not need for survival, but are nice to have such as a fun toy.
You can ask the younger children the following questions and have a fun discussion:
- Can you give me examples of needs?
- Can you give me examples of wants?
- What should we spend our money on first; needs or wants?
- What would happen if I (parent) spend money on wants first and do not have enough leftover for wants? For example, if I buy a really expensive outfit, but have no money for food?
- Why is it important that we are smart with our money?
Needs versus wants is a simple money concept, but extremely powerful one. I have taught it to kindergartens, yet years ago I noticed that some of my adult clients were struggling with it.
When your child gets older (10 years of age and up), you can start discussing with them the mixture of needs and wants such as clothing or shoes. We all need clothes and shoes to protect us from the weather elements, but we do not need brand name clothes or shoes.
Talking with kids about items that can be considered a mix between wants and needs is extremely important as they get older, because they are influenced by their peers, social media and pop culture.
Here are some suggested questions that you can ask your child and follow up with an educational discussion:
- Can you give me an example of an item that is a mix between a want and a need?
- Can you explain why the following items can be classified as a mixture of wants and needs:
- cell phones
- computers
- cars
- mansions
- Do you think that brand name clothing/shoes cost more money to make than no name clothing/shoes?
- How important is it to have the brand name clothing/shoes?
- How much money do you think companies spend to market their products such as the cool brand name shoes?
Make all your discussion fun, positive and age appropriate. You can even take your discussion to a mall or a store where you can point at an item and ask your child to classify it as a need, want or a mix between the two.
Have fun!