July 21, 2020

One of the most important financial concepts you can teach your child is the difference between a need and a want. 

Not only will mastering this concept start your child on their way to making sound financial decisions over their lifetime, it will also help them form good decision-making habits that will help them in every area of their life. 

The textbook definition of this concept is that a need is something we require to sustain us: food, water, shelter, etc. Everything else is a want.   

Robert Baer, Vice President at Fidelity Bank.

However, I like to define this concept in simpler terms that kids can easily understand: a need is a "have to have” and a want is a “nice to have.”  The lines between these can get blurry.

For instance, you need shoes, but does a 9-year-old need a $200 pair of sneakers? You need gym shorts, but must they cost $75, or is it better to buy a $15 pair of shorts instead?  

This concept really hit home with my son when he started having to pay for things with his own money.  It’s amazing how frugal he became when he wasn’t spending our (his parents') money.  He also had a different appreciation for waking up on time when he started driving to Jesuit and had to get to school early for a prime parking spot. 

It's Okay To Say "No"

Saying no to your child is an important part of reinforcing this concept. 

If you don’t want to deliver a hard no, then try a compromise. You can negotiate the particulars, but the quicker your child internalizes the concept of needs vs. wants, the easier your negotiations will become over time. 

How To Get Started

Starting this learning process will take some planning on your part. First, identify the topics you’ll use (we have some suggestions below), and then plan how to introduce the concept and how frequently you'll reinforce the messaging. This process will be different for every child.   

Using real world examples will best help them understand the concepts. For example, because they’re a food, why are Oreos not a ‘need’?

Be prepared to cover the following four areas with your kids. 

  • Discuss the difference between needs and wants, and identify examples of each that are relevant to your child. 
  • Work with your child to help them prioritize their own needs and wants, and discuss these together. 
  • Let them help you evaluate different choices when making a purchase; this will help extend the conversation and internalize the lesson. 
  • Don’t be afraid to talk about impulse buying. More times than not, they’ll forget what they thought was a need. 

Needs vs. Wants Discussion Items, by grade 

3rd to 5th Grade: 

  • Toys / games 
  • Chores 
  • Friends coming over 
  • Sleep overs  

6th to 8th Grade: 

  • Cell phones 
  • Ear Buds vs Air Pods 
  • Wearing make-up 
  • Price of new clothes 
  • Social Events - Dances, going to the mall, etc. 

High School Student:

  • Car 
  • Driving 
  • School trips, vacations with friends 
  • Paying for insurance 
  • Events (concerts, the mall) 

Remember, you know your child better than anyone. When it comes time to discuss their needs vs. wants, be sure you’re discussing it on their terms and their level of maturity and responsibility. In the long run, they’ll thank you for this. 

For more information, some courseware and workbooks visit www.bankwithfidelity.com/finlit. 


Robert Baer is a Vice President at Fidelity Bank.  He coordinates Fidelity’s Financial Literacy initiative.  

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