As you try to teach your child about money, one of the most basic things you will need to get across is the idea that a want is very different from a need. Many children have trouble distinguishing the two, especially when they are very young, because their emotional focus on things around them makes it feel like just about everything is a must-have.
What’s a Need?
Needs fall into four major categories. These are:
- Basic shelter (at least protects you from the elements and is maintained well enough so as not to endanger health)
- Clothes (dictated somewhat by the need for physical protection, as well as by culture and legal regulations)
- Self-care items (medication, shampoo, etc., can be commercial or natural)
- Food and water (enough to stay properly hydrated and provide the balance of micro- and macronutrients needed for good health and development)
Everybody, regardless of their age, location or socioeconomic status, has these same basic needs.
What’s a Want?
Simply put, everything that isn’t a need gets classified as a want. A fairly clear example is a video game, which provides entertainment but which does not protect or cover, nourish or maintain health and hygiene. A little cloudier example is a doughnut. It is technically food, so some people would assert that it is a need, but because it is such a poor source of nutrition, it is perhaps more properly classed as a want.
Application to Kids’ Financial Education
When your child gets money, be it from allowance, paid chores or a simple job, his initial inclination likely will be to spend, not on needs, but on wants. This isn’t especially surprising, considering that kids are bombarded on a daily basis by dozens of companies who want them to buy different services or products. Even so, you need to curb the impulse.
The idea here is not that children shouldn’t be allowed to buy entertaining or pleasurable things. After all, life is meant to be enjoyed. Rather, the point is that needs should come before wants. In other words, kids merely need to learn how to prioritize. If they do not learn how to do this, they almost always have problems sticking to a budget, because they end up overspending in an attempt to cover both what they need and what they’d like to have.
Simple activities often can help reinforce that needs and wants are different, and that needs get top billing. For example, you can sit with your child and talk about what he uses to support himself day to day and make a list of those items. Then you can repeat the process with things that are fun or make him happy. Create a basic budget together that addresses all the items on the needs list first. For everything on the wants list, help him set specific goals, such as saving x percent of his allowance for y weeks, that will help him acquire some of the wants.