Needs are things that one requires for survival and, generally, for maintaining well-being. Examples include food, shelter, and clothing. Needs are essential to human survival; hence, they should never be compromised under any circumstances.
Wants refer to things that are desired in daily life, thus making life joyful and fulfilling, though not a necessity to sustain human life. Examples include video games, a new toy, or designer clothes. A Netflix subscription can be labelled as something you want because you do not want to lag behind your friends who are talking about the latest episode of Bridgerton. So, you get a minimum Netflix subscription to watch the series. Now, you can also talk about Bridgerton with your friends, fending off the fear of missing out, or popularly known as FOMO.
Why Teach This Balance?
When the children understand wants and needs, they learn several lessons. It helps in making the children decide the money-spending choices in a balanced way. They also make prioritized choices using allowances or earnings. Once kids are familiarized with what they need and what they want, a sense of responsibility towards money is developed. The better one learns how to distinguish between what's needed and what's wanted, the more wholesome he or she will be at spending and managing money.
Strategies That Work with Children
1. Use need vs. want in real life:
Explain to the kids your daily financial choices. While grocery shopping, for example, the no hogwash buy of groceries (needs) that comes before junk foods (wants) as daily buying can quickly bring home the above being applied. " When my son and I go shopping, I tell him to choose something he needs and one thing he wants," says Amit Banerjee, 34, from Siliguri, West Bengal. "It's simple but it teaches him how to prioritize".
2. Budgeting Exercise:
Get the kids to set a simple budget using their allowance or savings. Give them a checklist of what they receive, and what they need versus what they want, and follow the flow. This very hands-on activity will educate them on the best ways to manage their money. "When I was a kid, my parents made me prepare a budget for my birthday using my pocket money. It taught me that I cannot spend everything on toys—I have to save for school supplies too. It's a lesson I still carry today," asserts Pooja, 29, residing in New Delhi.
3. Decision Making:
Decision-making by children regarding a set amount of money must be incorporated in to the children. Present choices to them to either save it for something they need vs. to spend it on a toy they really want. Next, continue with the consequences of their choice and why they made the choice in that manner.
4. Goal Setting and Rewards:
Help the children set saving goals for needs and wants. Take an example when they want to play a new video game but need school supplies. Explain the savings plan by making them first save for school supplies, and the game, thereafter.
Such balancing of wants and needs is not just a monetary lesson but one of skills crucial in life that would help them make constructive decisions with time, which can effectively be taught by parents to their children, helping them grow into financially sound adults through practical exercises and real-life examples.
