Wants vs. Needs and How to Teach Kids the Difference

SUSIE GHARIB: Distinguishing between wants and needs — it’s a tough budgeting lesson, even for adults. But it’s not hard to teach, if you start early. With tonight’s “Kids and Cash,” here’s Alisa Weinstein, author of “Earn It, Learn It.”

ALISA WEINSTEIN, AUTHOR, “EARN IT, LEARN IT”: Let’s say you’ve begun
your kids financial education and she now knows the three classic money
buckets: saving, sharing and spending. You put a portion of your money in
your piggy bank, your savings account or your pillowcase for later use. You
donate a portion to a worthy cause of your choice. And the rest of your
money goes straight to whatever you want. And that’s great.

But there’s a fourth bucket many parents don’t consider. It’s needs –
– mostly because what needs would a four, seven or a 10-year-old have? As
parents, it’s our pleasure and our legal obligation to provide food,
clothes and shelter for our kids. But understanding that adult spending
money must be divided into needs and wants is a major part of financial
education. And it can be taught without requiring an eight-year-old to
contribute to the water bill. Kid-sized needs include things like school
lunches, birthday presents for friends, haircuts and as kids get older, try
extracurricular activities and clothes. All you do is transfer the
responsibility of purchasing these things from our budgets to their budgets
and that’s great practice they’ll need for the real world. I’m Alisa
Weinstein.

GHARIB: We’ve got more tips for teaching your kids the ABCs of
finance on our web site. Look for Alisa’s “Kids and Cash” blog at nbr.com.


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