“Do I really need this?” It’s a question we all eventually ask ourselves. It can be difficult to distinguish between what we need from what we want, as some choices in life aren’t always that easy. It’s a matter of assessing and realizing what’s more important in your life right now and making the right decisions afterward.
So how can we tell the difference between needs and wants? For starters, needs are things that keep us alive and make our lives easier, such as water, food, shelter, transportation, and useful kitchen appliances to cook your food. On the other hand, wants are things that aren’t essential but are nice to have or experience, such as taking a vacation, buying a new TV, or getting the latest and greatest kitchen gadgets.
But the concept of needs vs. wants may be lost on a child as they may not understand the importance of needs vs. wants—that is why it is up to us parents to help them differentiate between the two. We can do this by teaching them why they should prioritize needs, how they can achieve both their needs and wants, and ultimately, instill an early sense of financial literacy in their developing minds.
Needs Vs. Wants
When it comes to choosing between needs versus wants, the obvious choice is definitely needs. But, sometimes, our wants can get the better of us, and we might completely dismiss our needs. For example, you know you need to buy dinner tonight. But instead, you chose to spend your money on a movie ticket since the new blockbuster film is out.
You feel a little hungry, but get a sense of contentment from watching a movie you’ve been anticipating for months. The money you had could’ve nourished your body, but you chose to nourish your soul instead—which is not always bad. But, you must always be mindful of what to prioritize since sacrificing your needs for wants can be costly.
It is always possible to attain both your needs and your wants. It all comes down to patience and decision-making. Suppose you chose to eat dinner instead and waited for the chance to afford a movie ticket. You managed to do both by not giving in to temptation and compulsiveness which allowed you to nourish your body and soul.
Though the example was simplistic at most, life isn’t that binary, and gray areas between wants and needs will occur. This can make choosing very difficult. That’s why it is very important to distinguish between a need and a want, and more importantly, to make the right choices.
While it’s never too late for anyone to be more patient and to improve their decision-making skills, the truth is that these skills should be instilled and developed at an early age. For the most part, kids are still navigating the world they’re living in, and it is your duty as a parent to guide them on matters involving patience and decision-making.
Kids Can Find it Hard to Differentiate Between the Two
When it comes to our kids, we always want to give them everything they desire. Regardless of whether or not we can afford the things they want, it is always important that we show them how to prioritize needs over wants at an early age. This could be a tricky concept for a child since they don’t have the faintest idea of what resources are.
So, first and foremost, we need to introduce them to money—how it works, what it does, and where it comes from, in a way they would understand. It could be as simple as explaining that money isn’t easy to find and it is finite, so it is up to us to decide on what’s more important and what should be prioritized first.
We could also try to enrich their minds with hypothetical questions and situations that encourage them to decide what to do with a set amount of money. Interact with your child, be receptive, and answer questions that they might have about money. By explaining these concepts early, your child will eventually develop an early sense of financial literacy.
If we instill an early sense of financial literacy in a child, eventually, they'll be able to differentiate which things are considered needs and wants for themselves. For starters, we should clearly explain the difference between the two and why they should prioritize needs first.
Explain to them in a way that they’ll understand that needs keep us alive and wants aren’t essential. Explain that if we want something, we have to earn it or save up for it. Doing this can also help a child realize the importance of saving, working hard, and being patient.
Why Children Need to Know the Difference Between the Two
Teaching kids about needs versus wants is an important life skill that will help them grow up to be responsible adults who can manage their money wisely. These will help them develop important habits like saving money or working hard to get what they want. They will eventually carry these habits growing up and be more responsible in the future.
In a 2020 study on parental financial education during childhood and financial behaviors of emerging adults, it is stated that “as parents overtly teach their children about key financial principles, their children will be more prepared to engage in healthy financial behaviors in emerging adulthood.”
This can be a bit difficult because, as a parent, we always want to spoil our children. No other feeling in the world is as heartfelt as seeing the light in our child's eyes when they get a toy they’ve always wanted. But, then again, as parents, we shouldn’t spoil our children and just let them have what they want all the time.
There should always be balance when it comes to giving children what they want because their entire adult life could depend on the financial training we give them at an early age. As they grow older and become adults, they’ll slowly realize just how important these life skills are and become grateful for your guidance when they were just kids.
Aside from learning important life skills that they could take advantage of when they grow up, teaching your kids the importance of wants vs. needs could also help you as a parent. Once your children understand the importance of these concepts, they’d be less prone to make you buy things for them, especially when you’re in a mall or at a supermarket.
We’ve all been there, we’re at a supermarket on a busy day, and we’re there only to buy essentials, and this could be as easy as 1 2 3 when you’re alone. However, when kids are in the picture, it can sometimes be a very stressful situation. They point at whatever they want and cry, or worse, cause a tantrum if you don’t buy it for them.
Not only is this a very stressful and embarrassing situation, but it makes it hard to save money or limit expenses when we eventually give in to our child’s wants in order for them to behave.
Role of Parents and Family in basic living expenses
As parents, we have to be reliable role models as well. Our children consider us their teachers, and as teachers, we must do right by them and lead by example. That means creating an environment where our actions should also reflect and adhere to the teachings that we provide to them.
If we are with our children and we encounter something that questions our perception of needs vs. wants, instead of giving in to temptation, we could use this as a learning opportunity for our children. Always lead by example, and your child will eventually follow suit.
As a matter of fact, in a 2017 study on children’s feelings about spending and how it influences their financial decision-making, researchers found that a child’s spending and saving habits are closely related to how their parents manage money. If a parent is always keen on saving, their child also possesses the same quality. Inversely, if a parent is a big spender, the child’s perception of spending could also be the same.
Sometimes, decisions like prioritizing wants over needs are worthwhile sacrifices for us, but we must remember that our children are watching and learning. Children should not be expected to follow your advice if you don't practice what you preach.
We should also note that children grow up and learn from those around them, including parents and other family members. How we talk about finances can also help them learn how to manage their own finances. As they overhear our conversations, we should never underestimate the ability of a child to listen to and analyze the information they hear.
Another excellent way for a child to learn about how to manage money is to talk to them. Communicate with them, be candid about the family's financial status, and let them know if the family is struggling. Doing this gives them an idea of the importance of money and how it could affect a family if it is lost or mismanaged.
In a 2018 study about financial literacy and family communication patterns, it is said that a person’s ability to manage their finances was largely based on their personal family dynamics. The study showed that communication-oriented families positively affected a person’s financial literacy.
Communication is a great teaching tool, and a family that communicates well could be a great way for a child to pick up lessons based on the types of talks we give them. By sharing experiences, problems, and knowledge, a child will surely pick up valuable snippets of information they could use as they grow up to navigate through life.
A 2019 study about financial education for kids showed that financial education learned from school definitely helps kids make transactions effectively, but not in responsible spending. So, as parents, we should not only rely on the educational system alone to teach our children about finances, we also have to make sure that they learn from us as well.
Moreover, an article from 2021 about the correlation between financial socialization and romantic relationships showed that financial stability can help relationships flourish. So teaching kids at an early age about financial literacy can also potentially help them in their future relationships.
How Can You Teach Kids to Understand?
It would take a lot of patience to make a child understand the importance of managing finances. Children can be unpredictable, and most even have a low attention span—these behaviors can be detrimental to the learning process. So a great way to make them understand aside from talking to them is by giving them examples.
A good way is when your family goes out for a vacation. When you go out on vacation, naturally, you’ll have a planned budget and a list of possible expenses. So, aside from having a fun and amazing family trip, you can also turn this into a potential learning experience for a child on how to manage finances and budget.
List all the possible things you could do on your vacation. Let the child know that you’re on a budget and that anything non-essential can compromise your family’s needs, such as food or lodging. Then, let them know and explain that you can still have a fun vacation, without having to spend any (or a lot) of money.
Children learn better through experience, so why not give real-life experiences so they can better understand and differentiate the concepts of needs and wants? A good example is bringing a child to a store and letting them choose between food and toys. Explain why the child could only choose one and tell them how their choice could affect them and your family.
If your child chooses the toy, explain how this doesn’t benefit the family and that they’ll be the only ones to enjoy it. Tell the child that if they want the toy, they should save up for it until they can afford it. Doing this incentivizes the child to save up for their desires while learning about being frugal and the concept of delayed gratification.
You can also tell the child that if they do better in school or ace a test, you’ll give them the toy as a reward for their efforts. Doing this at an early age teaches the child the merits of hard work, and they will be more inclined to work for the things they want, which is a great asset to have when they grow up to be adults.
Keep in mind that experience is the best teacher, and experiences stick more to a child’s learning process. In fact, in a 2017 study about financial literacy education for children and adolescents, experts found that “a promising method to teach financial literacy to children and adolescents in primary and secondary school is experiential learning.”
Spending money on things you don't need
There is nothing wrong with spending money on things you don't need, as long as you can afford it. If you are buying things with your credit card and you cannot afford it, then that is a problem. But if you have the money to spend on things that are not necessary, then go for it!
People might say that spending money on things you don't need is a waste. But we all have different priorities and definitions of what is a "need." For some people, buying expensive designer clothes or luxury cars is a priority. Others might prefer to spend their money on experiences rather than material possessions. As long as you are happy with your purchase and it does not break the bank, there's nothing wrong with it!
Teaching kids about money you must remain constant
If you want to teach your kids about money, key differences is you have to be consistent. You can't just tell them that money is important and then let them do whatever they want with their allowance. You have to be firm about money management from an early age.
Kids are like sponges - they absorb everything around them. So if you're always worrying about money or arguing with your partner about finances, they're going to pick up on that stress. Rather than teaching them how to handle money responsibly, you'll just be perpetuating a cycle of financial insecurity.
Conclusion
Financial literacy for a child can be hard to teach. Even we adults are often guilty of prioritizing wants over needs ourselves. However, we must remember that the concepts of needs vs. wants can mold our children to become responsible at an early age. So, to teach our children discipline, we also need to practice it ourselves.
So even if we’re long gone, we know our children are safe and well with the guidance that we gave them.
Frequently Asked Questions (FAQs)
How do you explain needs to a child
Needs are things that are required for survival, like food, water, and sleep. Everyone needs these things in order to live and be healthy.
Sometimes people have different needs because they want or need different things in life. For example, one person might need a lot of friends to feel happy, while another person might be happy with just a few close friends. Or one person might need to travel a lot to feel fulfilled, while someone else might be perfectly content staying home most of the time.
The most important thing is that everyone is different and everyone has different needs. It's important to figure out what you need in order to be happy and fulfilled, and then try your best to get those things in your life.
How do you teach kids about money change
-Start by showing them how to count money. This includes both bills and coins. Teaching them about the different values of each will help them understand how to make change.
-Next, show them how to make basic transactions. For example, if you're buying something for $2.50 and you hand the cashier a five dollar bill, explain that they'll give you back $2.40 in change.
-Then, let them practice making change themselves. You can do this by play-acting storeowner/customer
How do you teach kids about financial planning
By giving them an allowance and having them save for specific goals.
Most kids are never given the opportunity to learn about basic living expenses. It's such an important life skill. One way to teach kids about spending money is to give them an allowance and have them save for specific goals. For example, you could have them save up for a new toy, a trip to the amusement park, or a new cell phone.
Another way to teach kids about financial planning is to help them understand the concepts of earning, spending, and saving money. You can do this by letting them work part-time jobs and/or by setting up a savings account for them. When it comes to teaching kids about financial
Difference between needs and wants kids
There's a big difference between needs and wants when it comes to kids. Wants are things that they would like to have, but don't necessarily need in order to survive or be happy. For example, a want might be a new toy or gadget. On the other hand, needs are things that they need in order to live a healthy, happy life. Examples of needs include food, money to pay rent or mortgage, car, clothing and healthcare.
Often times, kids (and most people) can get caught up in wanting things that they don't really need. And while it's okay to indulge in our wants from time to time, it's important not to lose sight of what's truly important in life: basic needs
How to teach your kid how to spend money responsibly
If you want your child to learn how to spend money responsibly, you'll need to give them some real-world experience with handling money. Here are a few ideas of how to do that:
1. Start them young. As soon as your child starts expressing an interest in spending money, start giving them pocket money or an allowance. This will help them get used to the function of money the control of handling money and making purchasing decisions.
2.Encourage them to save up for something they really want to purchase. This will teach them the value of delayed gratification and saving up for something they truly want instead of impulsively buying things they may not even end up using or liking.
3. Help them understand the main difference between needs and wants.
At what age do kids start caring about money
It depends on the kid! Some kids are interested in money and saving from a very young age, while others may not really start caring about it until they're a little bit older. In general, though, I think most kids start caring about money around the time they begin to understand what it is and how it works. For some kids, that might be as early as 7 or 8 years old, while for others it might be a little bit later – 10 or 11 years old. But there's no one "right" answer to this question – every child is different!