To evaluate the importance of a buying decision, you need to be able to tell if what you are about to spend your money on is a “need” or “want”. This part of the decision-making process can save you from spending money on things that really are just satisfying an emotional gap and that perhaps your money would be better spent elsewhere or saved for your future financial freedom.
In our “money lessons for life” classes, we often have debates on “wants” and “needs”. Think about this. Is a fridge a want or a need? Most people say it is a “need” and give well thought out reasons why a fridge is a need. Now close your eyes and imagine that you are living in Puhket in Thailand and a Tsunami hits and you escape with your life. Now ask yourself – is a fridge a want or a need? It really is a want. Personally I would put it high on the list of wants!
In our modern society wants and needs have become confused. Talk about wants and needs with your family and discuss items around your home and categorise them as a need or a want. Become aware of how you speak about things you would like to have. If you are continually saying “I need this” or “I need that” then your subconscious kicks in and you may buy things you really just want because you think you “need them”.
Some of the items that appear as “wants” may in fact be planned for, which is great and paid for with cash – so point that out. The lesson we want your child to learn here is the difference between “needs” and “wants”. It is the purchasing of the “wants” without due thought and planning that can cause financial difficulty.