The Luxury Marketing Council of Florida says that luxury spending has seen an annual growth of 20-30%, where general retail spending has seen an increase of 5%. One Encarta Dictionary definition of luxury is “an item that is desirable but not essential, and often expensive or hard to get.” Translation: needs are up 5% per year, and wants are up 20-30%!
One of the most challenging traps for our children (and for us) when it comes to money is distinguishing between our wants and our needs. But if we can keep this straight, we’ll be well on our way toward equipping our children to make wise buying decisions for years to come.
So what is a need? Food, shelter and clothing. Generations of people have lived and continue to live with very little money—only a fraction of what most of us live on. That’s the baseline for where we start talking about needs. Living on very little money is not fun for anyone, and that desire for an easier life or the things other people have is what often gets people into financial difficulties.
Obviously, wants are things that our children would like to have. Usually wants come disguised as needs. I need clothes, and this name brand that is 50% more expensive will make me cool. Kids want to fit in with classmates. The problem is that the non-name-brand clothes provide the same basic benefit. They provide protection against the weather conditions.
I don’t have a problem with name-brand clothing, especially when I can buy the clothing at the same price as the generic or discount store option. By shopping around and being patient, I can often find name-brand items—Nike athletic socks or Polo button-up shirts, for example—just as inexpensively as comparable options that are generic. Also, it’s appropriate to account for the difference in quality during the decision-making process.
Because of advertising, peer pressure or a range of other factors, we too easily blur the lines between needs and wants. We convince ourselves that our wants are really needs. I guess I’m talking about us dads now. But our children are watching and learning from what we do. Raising our children with a healthy awareness of their needs and wants means addressing this question ourselves. We need to take a hard look at our financial decisions and priorities.
Is it wrong to have some things that are “wants” and not “needs”? Probably not, although that’s really a question that you, your family and your budget will need to settle between yourselves—and each family’s priorities and financial situations are different. But I will say that it’s dangerous to start thinking about pursuing things that are “wants” if there’s no bigger plan and a limit for your spending in place. It’s just too easy to go overboard.
So, like with many areas of fathering, your modeling is huge. To be more proactive in teaching your children about wants and needs, I recommend having regular conversations with your kids as teachable moments come around. Whenever they use the word “want” or “need” in reference to something, question them on why they used that word. Is it really a need, or a very strong desire? What likely caused that desire?
If your children can get a good grasp of the difference between needs and wants, it will be a big benefit to them for the rest of their lives. We can usually communicate the ideas pretty simply, but applying the ideas to real-life wants becomes very complex. So it’s vital that we’re intentional with this. And there’s no substitute for spending time with your children so you have those needed teachable moments.
- When you shop for groceries or clothing with your child, find two items that are virtually the same except for the brand name. Talk about the difference in price and which one you want versus which one will meet your need, and what other factors (quality, fit, taste, etc.) affect your decision.
- The next time your teenager wants a new pair of jeans or shoes, give him the money to buy a reasonably priced pair. Then tell him that he can keep any money he doesn’t spend on the item. This will allow him to weigh needs and wants, priorities, and many related issues as he makes his buying decision.
Shane Barkley is President of Dad the Family Shepherd and author of Dad Cents, from which this article was adapted. He has a degree in business Administration from John Brown University and has 10 years of experience in the financial consulting industry. Shane and wife, Valerie, live in Topeka, KS, with their three daughters. Read more from Shane.