TIPS Money Matters:
Knowing the Difference
Between "Wants" and "Needs"
Mary Ann Holland, Extension Educator
University of Nebraska Cooperative Extension
One of the most difficult tasks we face as parents is to help our children understand the difference between "wanting" something and "needing" something. An individual, whether a child or adult, faces choices every day about what is "needed" for survival and well-being, and what we would "like to have" to improve daily living.
The "needs" versus "wants" dilemma continues throughout childhood into the teen years, and on to young adulthood. Priorities and focuses shift as families enter different phases of their lives. Even for adults, the lines between "wants" and "needs" are often blurry. It is no different when it comes to money; spending decisions are often unclear.
From an early age, children can learn the value of money. Parents guide their child’s relationship with money in various ways: through allowances, gifts, earnings, savings, and spending decisions. Encourage family dialog about money matters; discuss where income "comes from," and where money is spent. When children are old enough, parents may want to let them have a voice in certain spending decisions.
Helping a child determine a "want vs. need" when purchasing something with their own money establishes a baseline for knowing the value of money. It is also important to let children make some poor choices when it comes to spending. They will learn from their mistakes and be more inclined to make a better choice next time. Parents should assist their child with establishing a savings or checking account, help them record what they spend, plan savings for a not-too-distant future goal. It is an excellent way to teach a child practical financial management skills. Financial lessons learned during childhood will be long remembered.
By the time a child has finished high school and contemplates the future as a college student or member of the workforce, his or her parents hope they have been successful in setting good examples for their children when it comes to money decisions. The young wage earner quickly discovers the price of basic "needs" can be much higher than their income. Learning to balance income and expenses takes practice. Dollars spent on luxury items [wants] come at the expense of other things, i.e., necessities. Good money management skills will come in handy as the young adult goes off on their own.
This week talk with your child about money matters. Play money, with both coin and currency, can be an excellent tool to help the child visualize "how much" something costs. You may want to use a piggy bank and cash register to symbolize "savings" and "spending." Contact us at unlforfamilies@unl.edu and let us know what unique ideas you used as you and your child discussed financial decision making.
