Do I Need It or Do I Just Want It?

In this day and age of wants versus necessities, there are important choices that we all have to make. Advertising would have us believe that acquiring more things makes us happy. However, this leads to many people trying to find happiness with the newest gadgets or purchases and finding out that happiness does not necessarily follow. Many find that the less they own, the happier they are.

Knowing when and on what to spend money, and different ways to save money, can lead to long term happiness and satisfaction instead of the short-term happiness we get with spending on unnecessary items. As I wrote in my previous blog post, I am in the process of learning about choices that I can make regarding my financial future. I regret not having candid conversations with my parents and significant other in the past about money and how to successfully invest and save. I also wish I had discussed finances and money with my children starting at a very young age. Part of the problem is that I, myself, had limited understanding of finances. Recently, I found some great tips about introducing age appropriate information about money management to children. Discussing wants versus needs is definitely an important lesson to learn. We usually want luxury items but food is a necessity. Instilling a "savings mentality" in children is most helpful if it is approached from a young age. However, most of us feel uncomfortable at the slightest mention of money or the financial situation we may be in. It seems that the topic of money invokes strong emotions within us whether it is shame from having it or the shame of coming from humble beginnings. Talking about finances is like any other topic...talking about it takes the shame out of it. So, let's talk!

Discussing with each other the concept of wants versus needs, having to save for that special purchase, and how we feel when we are unable to buy something right away, are important talking points that we can begin with. A Smart Girl’s Guide to Money by Nancy Holyoke has some creative quizzes that can indicate what type of spender you are, what jobs might be right for you, and more. Taking the quizzes with your child can be an ice breaker activity to open the floor for discussion. I took one of the quizzes myself and apparently, I am a “free spender.” 

Some excellent tips that I read about in Smart Money Smart Kids by the father and daughter duo Dave Ramsey and Rachel Cruze, made a lot of sense to me. To teach younger children, money needs to be a physical, tactile object that can be seen, taken away, and managed. One suggestion I read in this book was to create a designated space for each finance related purpose. One visible way of doing this is by creating three envelopes and labeling each for spending immediately, saving indefinitely, and giving charitably. Using this method, children are able to physically see money and put it away in its corresponding envelope for each particular purpose. Label each envelope with the following ideas:

Spend: These funds are for spending on things of your choice (movies with friends, items that you want to purchase, etc.)

Save: These funds are for a long term, bigger purchase (for a laptop, game, gaming device, etc.)

Give: This money is for the child to give to charity in order to develop a sense of responsibility to community. Studies have shown that individuals who give back and donate to different organizations develop a sense of happiness and personal satisfaction.

At the end of each week or month, go over how much is in each envelope as the result of their hard work and patience. The amount of money in the "spend" envelope should be for your child to enjoy. So, at the end of each week or month, let them see how much they have in their "spend" envelope and take them shopping. Letting my child spend what was in their wallet at a store of their choice taught them to stay within their budget for that week. 

Open up a bank account for your child so that your child can deposit the money in the "save" envelope each month until they have reached the amount needed for that one special item. My children pooled their money and saved up for their gaming systems because I did not want to pay that much money for a toy. (I know, Bad Mom Alert!) This way, the child learns patience and delayed gratification. Children who get everything they want immediately usually have to learn this lesson the hard way later on in life.

For adults, opening up a bank account that is just for saving a percentage of your monthly income is a useful thing to do. Every month, I put a small amount of my paycheck into my savings account. I treat this money like a monthly bill that I need to pay. This prevents me from thinking those funds are there for me to spend. Then at the end of the year, I can keep track of how much was saved throughout the year. These funds can either be used in emergencies, for a guilt-free vacation, or any other bigger expenses.

Together with your child, try to find a charity or good cause to give the funds that your child has saved in their “Give” envelope so they feel empowered and proud of themselves. When my children were younger, they visited a young boys' orphanage in their Dad's hometown in India. My sons spent an afternoon at the shelter having snacks and playing with the 30 young boys and saw their living conditions. They heard the stories of how the youngsters were displaced by war or extreme poverty. Some of them had been abandoned at the shelter by their own family members. This encouraged my children to save their birthday money, tutoring money, etc. and send money to this Boys' home for many years after their visit. The experience has had a huge impact on how they see the world and they now feel a sense of responsibility to their local community, fulfilled by helping out and donating to local food shelters and other people in need.

As they get older, investment and business opportunities are things that parents and children can learn about together. For example, my son started tutoring during the tutoring program offered at our local library when he was in high school. This then led to him getting a job at a local Math Learning Center in our township. In college, he has continued helping other students through the Writing Center at his school. He still spends, saves and gives from whatever amount he makes at school. Another son has started to invest a little bit in the stock market and tracks the progress of his investment. 

Some age appropriate and easy to understand resources that I personally learned a lot from are mentioned below and can be checked out at your local branch of the Mercer County Library System.

- by Kaneeze, Hightstown Branch

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