When it comes to teaching kids about money, it’s easy to get overwhelmed. Should you start with saving? Budgeting? Investing? The truth is, the very first lesson you should teach your kids about money is one that lays the groundwork for all the other financial decisions they’ll make in life: understanding the difference between needs and wants.
Sounds simple, right? But this distinction is the foundation for smart spending—and it’s a skill that even adults struggle with sometimes. If we can teach our kids early on how to separate what they need from what they simply want, they’ll be well on their way to making better choices with their money as they grow.
What’s the Difference?
Let’s break it down in kid-friendly terms:
- Needs are the essentials. Think food, a place to live, clothes to keep you warm. These are the things we can’t live without.
- Wants are the fun stuff. Toys, video games, eating out at restaurants—these are the things that make life more enjoyable, but we don’t actually need them to survive.
This might seem obvious to us as adults, but kids don’t naturally think this way. For them, everything feels like a need. That new action figure? Essential. The latest video game? Gotta have it! So, the goal here is to gently help them see that not everything they want has to be bought right away.
How to Teach the Lesson
Here’s a simple way to start this conversation with your child the next time they ask for something new:
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Ask them to identify whether it’s a need or a want. If they’re asking for a toy or snack, take a pause and ask, “Is this something you need, or is it something you want?” Have them explain why. This helps them think about their choices and reflect on what’s really essential.
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Use examples from your own spending. When you’re at the grocery store or shopping online, point out your own decisions. “We need to buy food for dinner tonight because it’s a need. But those cookies? They’re fun, but they’re more of a want.” By modeling this thinking, you’re showing your kids that even adults make these distinctions in their day-to-day lives.
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Make it interactive. For younger kids, turn it into a game! Have them look around the house and point out things that are needs (like the fridge or their winter coat) and things that are wants (like their favorite toy or the tablet). This can be a fun way to get them thinking more critically.
Why This Lesson Matters
The “needs versus wants” lesson does more than just teach kids how to categorize their spending. It builds a lifelong habit of delayed gratification—the ability to wait for something you want, which is key to financial success down the road. Kids who learn early on that they can’t always have everything they want immediately are more likely to develop saving habits and make thoughtful purchases later in life.
As they grow, this simple skill will serve them when they’re deciding between spending money on an essential expense (like rent or groceries) and splurging on a vacation or a night out with friends. Understanding the difference between needs and wants is also a big part of budgeting, which they’ll eventually need as they manage their own money.
What About Wants?
It’s important to note that wants aren’t bad! In fact, they’re a big part of what makes life enjoyable. The goal isn’t to make kids feel guilty about wanting things; it’s to help them understand that they need to prioritize and be thoughtful about spending. You can even show them how to save up for the things they really want, which reinforces the idea that patience and planning pay off.
An Ongoing Conversation
The beauty of teaching your kids about needs and wants is that it doesn’t have to be a one-time lesson. It’s a conversation you can revisit over time, as they grow and as their understanding of money evolves. And trust me, they’ll be better off for it. The sooner they learn to tell the difference, the sooner they’ll develop healthy financial habits that will stick with them into adulthood.
So next time your child is eyeing a new toy, or your teen is begging for the latest gadget, take a breath, and use it as a teaching moment. Helping them understand the difference between needs and wants is one of the best financial gifts you can give them.