One important part of financial literacy is teaching your child how to differentiate between needs and wants.
Needs are classified as things we can’t live without, such as:
Wants can be a little trickier to define because they can somewhat overlap with the needs column. While you need food to survive, it should be limited to healthy food while treats are considered a want.
Teach your child to understand that even the small things they may take for granted; such as water, electricity, heat, etc., cost money and therefore, you aren’t able to fulfill everything on their ‘want’ list.
Make it clear that you will take care of the needs, while extras will require your child to save up to compensate for the difference. You go to work every day in order to pay for the needs, so they should put in a little work to help pay for the wants.
For example, your child needs a new pair of shoes for school, but instead of the generic store brand, they want the more expensive name brand pair. If you were planning on spending $30 and the pair they want is $75, they will have to make up the extra $45 to get the shoes.
Learning this lesson now will help encourage your child to make smarter financial choices and live within their means as an adult.