How to Tell Your Kids No and Teach Them Financial Priorities (2024)

It’s tough to talk about money, even when the discussion is with someone mature and rationale. When it comes to teaching your kids about finances—in particular, what’s a “want” and what’s a “need”—it can be even tougher. It’s not easy to explain to your child that the toy truck they think they need, isn’t as important as the electricity you actually need to keep your home running.

Saying no is an important part of teaching children that they can’t have everything that they want (even if it’s affordable). Kids need to know you will provide everything they need. Teaching them the difference between needs and wants will set them up with proper financial priorities that will benefit them later in life.

Overview

Before you strike up conversations with kids about what is a need and what is a want, it's important to make sure you have a good handle on it in your own mind.

In fact, studies show technology has changed our definition of needs versus wants.

For example, do you need a smartphone? Well, maybe your phone is necessary because it allows you to call for help in the event of an emergency. And perhaps you operate a business that requires you to have a phone so you can earn money that takes care of your basic necessities. But, on the other hand, plenty of people survive without a smartphone.

Needs vs. Wants

For clarity’s sake, you might make all“needs” fall into the categories of food, shelter, and clothing, while a “want” is something other than that. There’s a gray area, of course—for example, Oreos are food, but they’re certainly not necessary.

An RV provides shelter, but something less expensive and more practical certainly does the trick as a “need.” Designer clothing provides warmth and protection, but no one needs a $200 pair of jeans.

This dichotomy is a very tricky point for kids and teens to understand. Age-appropriate explanations and exercises can help.

Read Books Together

When you have little ones, a picture book on the subject can start the discussion. Here are a few books that can help kids learn to distinguish between wants and needs:

• “Charlie and Lola: I Really, Really Need Actual Ice Skates,” by Lauren Child. When Lola goes ice-skating with her friend Morten, she absolutely must have her own skates so she can be the very best skater in the whole school. Charlie reminds her that her yo-yo and guitar—which she really, really wanted—ended up unused in the closet, but she is certain this time is different.
• “Those Shoes,” by Maribeth Boelts. All Jeremy wants is a pair of those shoes, the ones everyone at school seems to be wearing. Though Jeremy’s grandma says they don’t have room for "want," just "need.” When his old shoes fall apart at school, he is more determined than ever to have those shoes. When he gets a thrift-shop pair that are much too small he realizes that sore feet aren’t much fun. Jeremy soon sees that the things he has—warm boots, a loving grandma, and the chance to help a friend—are worth more than the things he wants.
• “Lily Learns about Wants and Needs,” By Lisa Bullard. Lily wants a new bike. And a new raincoat. And ice cream. But how many of these things does she need? As Lily and her dad drive around town, Lily soon discovers that wants and needs are different things. She picks out which things people have to have. She might even remind her dad that he doesn't need root beer!

Have Grocery Cart Discussions

When your child reaches kindergarten, she’s likely ready to start learning a few more details about “wants” versus “needs” (if you didn’t broach it when they continually asked for the toys they saw on commercials as a toddler!) If your child regularly goes to the grocery store with you, this is a convenient exercise to do.

If they can read, let them hold the grocery list and identify those items to them as needs. As you walk through the aisles and pick up items, ask your child if it’s a need or a want.

If it’s on the list, it’s a need; if it’s not, it’s a want. Laundry detergent is on the list, so that’s a need. Ice cream isn’t on the list, so that’s a want.

For example, that vanilla ice cream is on sale, but the rocky road ice cream looks so delicious, though it’s not on sale. What would they have to remove from the list in order to get rocky road instead of vanilla? This teaches your child how you make sacrifices (or save up money) to purchase the things you want, or how to work that special item into a budget.

Chart It

If you can trust your child with scissors, you can do this discussion-provoking exercise to visualize wants versus needs. Grab a stack of magazines or advertisem*nt flyers from the newspaper, as well as a sheet of paper.

Draw a line down the center of the paper and label one side as “want” and one side as “need.” Ask your child to cut out items that fit into each category, and then talk about what they've chosen. You can do the activity, too, to show your kids that adults have wants, too, that they can’t always purchase.

Budget Exercise

Once your child is old enough to understand the basics of adding and subtracting, you can work up a mock household budget with them. Give them a set amount of fake money—say, $800—and a list of expenses, both needs and wants.

The list could include needs such as rent ($500—it’s just an exercise!), groceries ($50), gas ($20), and a car payment ($200), as well as wants such as video games ($25), cable TV ($50), a smartphone ($75), and fashionable clothes ($75). This will teach them that after the needs are met, not all the wants can be purchased without running out ofmoney.

Paying for Their Wants

Older children and teens can learn first-hand thebasics about needs versus wants when you allow them to pay for their wants.

Pay a weekly allowance for completed chores. Then, let your teenager buy everything they want outside of their needs. A cute new outfit, tickets to the movies, and pizza with friends should all come out of their own budget.

Of course, your child will need some guidance from you about how to save money. So, before you start this project, sit down together and identify the things they're going to want throughout the year—like a prom dress, spending money for a family vacation, and new basketball sneakers. Discuss how much they’ll need to save each week to ensure they have plenty of cash to cover those things.

Then, let them decide how to spend their money on other wants. If they make the mistake of spending all of their money on the first day they earn it, don't give them any more. Missing out on an outing with friends or not being able to make an impulse purchase will remind them to do better next time.

Let them face the natural consequences and explain that it’s a want and she can live without it. And she’ll learn valuable money skills that will serve her well throughout the rest of her life.

Be Willing to Say No

It’s hard to deny your child everything that theywant, but giving into everything asked for won’t do them any favors. In fact, overindulging your child could lead to materialism—which studies link to reduced life satisfaction and higher rates of depression.

Whether they ask for a new toy or are begging for a new necklace, saying no sometimes will remind them that they don’t need those things.

When you teach your child the difference between wants and needs, they’ll be more content with what they has. And you’ll be more likely to raise a child who becomes a content, financially responsible adult.