Needs vs. Wants: Teachable Moments at Home
Now that parents and children are
having online classes or working from home, it’s for their benefit to find and
make the most of teachable moments during the day. One of the basic life
lessons that a child must learn is correct money management.
How soon must we teach a child
about proper money management? Some parents think that this is too big or too
“mature” of a topic for a young child to handle. However, once a child already
receives an allowance or keeps money in a coin bank, it is the right time to
teach them the basics of proper spending and saving.
Before any other financial
lesson, a child has to understand the important difference between needs and wants.
It’s the one concept that will help them make correct financial decisions in
their young and adult life.
You might think that this should
be easy: needs are our basic necessities and wants are everything else that
aren’t so crucial to our survival. Nowadays, though, such sharp distinctions
are not so easy to make. It involves having frequent discussions on what is a
want or a need because, sometimes, it can depend on a particular situation or
the person affected.
In general, it’s best to discuss
these during moments when a purchase or payment has to be made. When you and
your kids get used to such discussions, it helps them learn how factors like
price, product quality, and their survival needs have to be considered when
spending money.
Once your child already
understands how to determine needs and wants, it’s time to go to the next
level: helping them save money to spend. This is how you relate the concept of
needs and wants with financial skills.
Explain that the reason your
child needs to save money is to prepare funds to purchase items that meet their
needs and wants. Financial consultant Fitz Villafuerte suggested one useful way
to do this with your child: the “three piggy banks” approach.
One piggy bank will contain
savings for needs. A second piggy bank will contain savings for wants. And the
third one? Savings for charity. That’s a bright idea, right?
Eventually, you will have to move
your child to an actual savings account. Since your child is growing up in a
digital, information-dependent world, they would need to know the basics of
bank savings as well.
BDO makes it easy to open a Junior Savers Account with a very affordable
initial deposit and maintaining balance. You can also set up a Junior
Savers Plan to help your child grow their savings. This allows you
to automatically deposit money from your BDO Online Banking account to your
child’s Junior Savers account based on a set schedule for transfer as well as
the amount to be transferred.
It’s best to have these regular
discussions with them. You’ll be doing them a favor and saving their future.
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