Needs versus wants

When you spend your money, you differentiate between needs and wants. Generally, you prioritize needs, like utility bills, over wants, like going to see a movie. However, for kids, it can be harder to tell the difference between needs and wants. Yet, building this skill is key to creating healthy financial habits for life.

Defining needs and wants

A need is something you must have to survive. Food, housing, utilities and basic clothes are all needs.

A want is something you don’t need to survive but would be nice to have. Trendy clothes, game systems and fees for streaming services are all examples of wants.

While wants are not necessary, they do make life more fun or comfortable. The purpose of explaining needs and wants to your kids isn’t to make them deny themselves any extras. Instead, you’re helping them find a balance so they always have what they need but can also afford something they want from time to time.

Putting it into practice

An easy way to start is at the grocery store. With your child, go through your grocery list and talk about which items are necessary and which items are nice to have. Discuss how you made these decisions. Ask your child to consider what would happen if you spent your grocery budget entirely on treat items. You can even talk about how packaging and displays are designed to make people want a product.

Once your child understands needs and wants, share your family budget with them. Ask your child to identify necessary expenses. Discuss with them why you’ve prioritized some things and not others. Talk to them about how you could rearrange your budget if you had to. Which items could your family do without? Which things could be delayed? Tell your child you know it can be emotionally difficult to eliminate or delay a want.

If your child has a job, you can ask them to consider if an item they want to buy is worth the hours of their time it took to earn the money for it. Is there something else they feel is worth it?

Dealing with envy

As your child gets into their pre-teens and teens, they’re more aware of socio-economic differences between them and their peers. It can be difficult for your child to see a friend having access to more extras than they do. It’s easy for a child to believe the latest shoes or smart phone are something they need. It’s important to recognize how difficult it can be for your child to experience these differences. However, it’s an opportunity to talk to your child about creating a savings goal for something they want. A budget can help them identify their needs while also giving them the opportunity to work towards their wants.

Resisting influence

When you were young, you likely only saw advertising on television or in magazines. Now, your kids see ads and sponsored content every time they’re online.

How can you help your child manage the influence of this kind of marketing? One way is to watch the same videos your child is watching and talk with your child about how marketing works. Explain how ads and sponsored content are designed to influence people to purchase a product or service.

Ask your child to consider if a product they saw in a video is something they need or is it something they want. Why do they feel that way? How can they find out more information about the product to determine if it’s worth the price?

By encouraging your child to consider their needs and wants, you’ll help them avoid impulse purchases.

Next steps

Contact me today for a copy of a SMART goals worksheet and a budgeting worksheet that can help you work with your kids on identifying needs and wants.

This information is general in nature, and is intended for informational purposes only. For specific situations you should consult the appropriate legal, accounting or tax advisor. 
Canada Life and design are trademarks of The Canada Life Assurance Company.