Teaching Children the Difference between Needs and Wants

For many of us, it's difficult to go to a store and only purchase what we need. Highlighted sales, shiny packages, and the latest innovations all beg to be taken home. Especially during this downturn in our economy, we need to make sure that we are spending our money wisely. This is an essential skill to be passed on to children, but it's often difficult to do. How do we teach children the difference between needs and wants? Follow these tips for some guidance:

• Teach by example: If your children are seeing you purchase frivolous things like video games, mp3 players, or excessive clothing and perfume, how are they supposed to understand the difference between needs and wants? Make sure that you are not satisfying all of your own wants and then trying to teach your children about frugal living. Try not to set a double-standard, and remember that teaching by example is often the best form of teaching.
• Start with the basics: If you're sitting down with your children to teach them the difference between wants and needs, start simple. Ask them what they need in order to survive. The answers should be along the lines of food, clothing, shelter, and basic health care and hygienic needs. After they understand that those are the basic categories of needs, explore the categories further. For example, ice cream is not a need, and neither is a new dress when you already have five. Remember to explain that it's not bad to satisfy wants if you have the means to do so. However, wants should not be satisfied in excess.
• Start a piggy bank: The classic penny bank is a great teaching tool for teaching children the difference between wants and needs. Give them a bank or an old jar and let them pick something they are really wanting that they can save up for. When they find extra change or do odd-jobs around the house they will be able to save up money. This will help teach your children the importance and reward of saving.

Although it may be frustrating at first, in the long run your children will be grateful for the knowledge they learn about finances and frugality. Also remember, just because something is a want doesn't mean it can't be purchased—just be careful about it (and use it as an opportunity to teach your children about satisfying wants sparingly). Be patient, and remember what it was like to be a kid!