an easy explanation for your child

Updated April 13, 2023

“But I just need a [insert desired item here]! Please can’t I have it?!”

Any parents who have earned their stripes know that little kids “need” a lot of things. Having conversations early and often about real needs vs. wants will undoubtedly help build a financial foundation…and also can help nip the begging in the bud.

Explain the difference

So where to begin? The conversations around needs and wants can be one of the earliest discussions to introduce financial literacy to kids as young as three. In kid speak, parents can explain that a need is something that you cannot live without. A want, however, is something that is nice, but not necessary, to have. Kids can understand that some needs are free, like fresh air to breath and water to drink, but most require money to buy.

Budgeting for needs vs. wants

When budgeting, money should always be allocated first towards needs. Once essential needs are met (like food, housing, transportation, etc), a portion of the remaining money can be used for wants (a new scooter, a trip to the ice cream shop or a fresh pack of baseball cards).

Keep the conversation going

Once kids have these basics down, parents can use everyday money moments to continue the needs vs. wants conversation. And while we want our children to understand needs vs wants, there is no doubt that wanting for or pining after something is totally normal. The key is to have kids take ownership of their own wants by budgeting from their allowance to practice purchasing these extras for themselves.

A BT Mom anecdote

Benjamin Talks Head of Marketing Alanna Weiss’ daughter really, really wanted a gumball machine. Since this was most definitely not a need for seven-year-old Eleanor, Alanna helped her come up with a plan to budget her allowance towards this particular want.

With $26 in savings, Eleanor put aside $4 from her allowance each week and was soon able to purchase the $38 gumball machine from her local toy store. Not only did she fulfill Eleanor candy dreams, but proudly handing over the money that she had carefully budgeted towards her “want” made the deal that much sweeter. An added bonus? Simple exercises like this help kids practice delaying gratification, an essential financial skill.

The Takeaway

Understanding needs vs. wants is an important concept under the umbrella of financial literacy for kids. Knowing the difference between a need vs a want helps kids make smart spending choices as they grow. In an era of instant gratification, it’s essential that all kids develop the framework for these financial decisions, one small money moment at a time.

Looking for more?

Here is a related, helpful guide you can use to teach your child delayed gratification.