How to Teach Your Children the Value of Money: Wants vs. Needs
1FirstCashAdvance Financial Help, LLC main mission is to help people to get the money they need to overcome financial emergencies. Our service extends you a helping hand proposing to fill in the form and find an appropriate financial solution. But we care about our clients and encourage responsible lending from the perspective of financial literacy and consciousness.
By this post, we want to bring the financial literacy issue to the parent’s attention because many parents are not sure about how to talk to their children about income and expenses. Indeed, we are used to thinking of money as a “private” matter. But teaching your children about money is one of the most valuable lessons you can offer as they are growing up.
Consider Major Arguments
Here are just a few reasons your kids need to learn about money:
- They will spend more wisely living under your roof and after going out on their own as adults.
- They will learn how to prioritize and save.
- They will be less startled by all the expenses which come with adulthood (especially “invisible” expenses like utilities).
- They are more likely to value the possessions and experiences that money can buy.
What’s the Most Appropriate Age to Learn About the Value of Money?
There is no age when children are too young to hear about money. You can be open about it their entire lives. But conceptually, they will not grasp it right away. They’ll be learning how to count by age 3 or so, and can practice counting coins, though they may not understand what the coins are for. Usually, this understanding comes around age 4. By ages 5 and 6, they should get that money is something that you exchange for goods in stores.
It is around ages 7 and 8 years old that you can start to impart some vital lessons. This is when kids learn the different values of different coins. Their understanding of time, particularly concerning the “long term” evolves around this age too, so they can learn about saving money and working toward long term financial goals.
How to Make a Child Understand the Difference Between Wants vs. Needs?
One of the most important concepts to teach your kids with regards to money is the “Needs vs. Wants” psychology. Children need to understand that when they are young, “wants” can feel like “needs”, but they are different. “Needs” are more or less universal, but “wants” are individual for each child. Let’s look at some “Wants and Needs” worksheet examples:
What are Financial Needs
- Health: Medical care and essential health and hygiene expenses are a need for the child and every family member (including pets).
- Shelter: Every person needs a roof over their head.
- Food and water: Emphasize that healthy food and beverages are a need.
- Clothing: Put a focus on practicality.
- Utilities: Make sure children are aware that things like water, electricity, heat, and cooling all cost money.
- Transportation: Being able to get from point A to point B is a necessary expense.
- Basic electronics: This might include a computer or mobile device. Many people classify this as a “want”, but for many people, it is now a fundamental business and communication need.
- Emergency fund: Kids need to learn the basic concept of how to save, and to teach them to create an “emergency fund” is a good starting point (just as it is for adults trying to save).
What are Financial Wants
- Sweets and snack foods.
- Entertainment (i.e., TV, streaming subscriptions, video games, books, etc.).
- Extra clothes and accessories.
It’s worth mentioning here that life is not bread alone, and all that. Kids do need at least some toys and entertainment for their mental health, which is an essential life need. But by teaching the difference between these items and those which are vital to basic survival, firstly, you help kids prioritize so that they cover their basic needs first, and secondly, you help them figure out which of their “wants” are the ones truly bringing lasting meaning and value to their lives. Those are the “wants” worth working hard for.
Techniques You Can Use to Teach Children How to Value Money
Once your children grasp “wants vs. needs” technique, here are some tips and ideas for teaching kids the value of money:
- Share your budget. Use visuals like pie charts to show where your expenses go. Demonstrate how little is left over for “wants”.
- Exercise. While shopping, point to items and ask your child: Is this a “need” or a “want”?
- Give your children an allowance. This gives kids a chance to practice with their own money and start saving. But it needs to come with a caveat.
- Restrict what you will buy for your kids. Provide for your kids’ needs, but have them cover their own “wants” as they get older. There can be exceptions for holidays and birthdays, but make sure there are clear rules.
- Provide “income” options. Consider drafting a list of individual tasks which your children can claim and complete to earn money from you.
- Offer “credit”. If your child wants something at the store but didn’t bring enough money, you can offer to purchase it on credit. As your child pays you back later, it will teach the concept of loans. It may also help to curb “an impulse buy” behavior (it is no fun paying for weeks on an item you no longer want).
- Encourage your child. Do not make working for something a punishment. Make it an opportunity, be positive and supportive about it. “This is important to you, so work hard for it. You’re doing a great job!”
Teaching kids the value of money is a years-long process, and it does take time, effort, and creativity. It also means being open about your income and expenses. But it is well worthwhile, as you will be providing your children with some of the most valuable education will ever get.