Teaching Kids About Money: Teach Kids about Want vs Need Now to Avoid Debt Later
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Shannon Ryan is a Certified Financial Planner (CFP®) and Mom on a mission to help busy parents teach their children simple, value-based principles that guide their money decisions and support their long-term financial well-being. Visit Shannon at www.TheHeavyPurse.com for more tips to raise financially confident children.

We’ve all been in a store when a child goes into a nuclear meltdown over a toy he wants. He shouts “I want this” while his parents try to calm him down. Sometimes we give them a nod of sympathy and understanding. Other times we are just grateful that it’s not our child screaming on the floor. When a child is in the midst of a full-blown tantrum, it can be very hard to rationalize with him or her. This is why you do the legwork beforehand, so you can minimize these situations in the future.

My girls, Lauren and Taylor, are now 10 and 8 years old and I started talking to them about money when they were toddlers. As a Certified Financial Planner (CFP®), it’s probably not surprising that money is a popular topic in our home. But it goes deeper than it being my chosen profession. I made the conscious choice to start talking to my children at such a young age because I wanted to help shape their money habits and beliefs before they had any negative associations with money. Now I can help them build a positive and healthy relationship with money, which is key to their long-term financial well-being.

One of the first lessons I wanted my girls to understand was the difference between a want and a need. Now I know that may seem like an impossible task: everything is a need to a child! And that is why it’s so important to start talking to them about wants versus needs at a young age. They don’t outgrow that mindset unless you help them.

Define “Want” and “Need” in a Way Kids Understand

I kept my definition very basic because my kids were young. If your kids are older, you can go into more detail, but still keep it simple. Your main focus should be on the application of the definitions.

A “want” is something you like, but don’t need, such as a new toy or a smart phone. A “need” is something you must have, whether you like it or not, such as food or clothes. Where I focus most of my attention is on helping the girls understand how the two overlap. You may need clothes, but you don’t need designer clothes. You may need food, but you don’t need McDonalds. It is very easy to justify wants as needs, and I want my girls to avoid that trap.

Success Tip: Be careful that you don’t inadvertently make your kids feel bad because they want something. Wanting is normal. What we need to teach our children is to understand where those wants fit into their priorities.

3 Ways to Help Kids Differentiate between Want and Need

I don’t believe money talks should be boring or lectures. In fact, they should be the exact opposite! I look for every day activities to incorporate these fun and educational conversations with my kids and encourage you to do the same. Here are a few ideas to get you started!

Turn Want and Need into a Game

Kids and MoneyOne of the best ways for kids to understand how to differentiate between want and need is to take them shopping. As you put things in your cart, ask your kids if the item is a want or a need. Let them explain their decision, then give them your answer. This is a great time to talk to your kids about how you decide to use your money. How you budget for things like food, clothes and fun. Ask their opinion on the things you buy. For example, you need cereal, which one would you buy and why?

When I posed that question to my youngest daughter, she picked one of her favorite cereals that was priced mid-range. I picked a different cereal, which was actually more expensive. We then compared the cereals together. I pointed out how much sugar was in her cereal and its overall lower nutritional value compared to my preferred cereal. In this situation, my daughter learned quality trumped price because being healthy and eating right is important in our home. This is a great opportunity to show your kids how your values and priorities affect your choices too. It’s not just about the price of an item.

Let Them Manage a Budget

My girls have managed their back-to-school budgets for the past couple of years with my supervision, of course. It has been a great experience as it gave them a chance to flex their decision-making muscles. They each had a budget and created a list of wants and needs. A few lessons they learned included, how to make compromises, such as buying store brand school supplies to free up money for things they valued more. They identified the one or two items they really, really wanted and discovered that if they could squeeze those items into their budget, they didn’t mind if they couldn’t get their other “wants” because they were able to get what mattered most to them.

Brent here: I had a bank account from very young age that was set up by my parents.  Having this bank account made me feel like a grown up and I also learned a lot about saving money to buy things that I wanted and needed. I recommend a Capital One 360 Kids Savings Account where you can get a $25 bonus just for signing up!

Set Family Goals to Help Answer the I Wants

Road To Hanna HawaiiWhen my girls were younger and would get a case of the “I wants”, I didn’t answer with  “no” or “we can’t afford it”. Instead, I reminded the girls of our family goal, which was typically a vacation. I would say to the girls, “That’s a really nice toy. I like it too. But remember, we’re saving our money to go on vacation to Hawaii. Aren’t you excited to go swimming with the dolphins? I am! So I’m going to choose going to Hawaii with you over buying this doll today. But you can buy the doll with your own money if it means that much to you.”

In most situations, the girls willing put the toy back on the shelf because I had reminded them of our money’s purpose – the family vacation – and renewed their excitement for the trip. A vacation is definitely a “want”, which the girls know, but it’s also a highly desired “want” in our family. They understand the sacrifices that need to be made in order to achieve such an important goal.

Money Talks Make a Difference

Today, my girls are more financially literate than many adults, and I am so proud of how money smart they have become. It is my firm belief that financial literacy is one of the best gifts you can give your children. And it starts with a simple conversation.

How do you, or will you, teach your kids about money?  

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