One of the principles of personal finance is understanding the difference between a want and a need. And then making sure that you budget for needs first and can afford the wants. But it’s a tad difficult to use an allowance to teach kids, at least the elementary school set, about this. At this stage, we parents cover all their needs. Their allowance helps them pay for – or save up and then pay for – some of their wants.
But I did discover by accident that there is something you can teach kids about evaluating their wants.
With two boys in the family, we’ve been going through a Star Wars The Clone Wars phase for a few years now. We’ve got LEGO sets, books, Wii games and Halloween costumes all with this theme.
One day, we were in Toys R Us in the Star Wars aisle and we came across the AT-TE Tank Vehicle. The price was $100. T was mesmerized. I happily told him he could save for it and we’d put birthday money towards it if he really wanted it. The allure dipped at that point and we moved on.
A month or two later, we noticed that the price had been cut to around $50. T perked up. This was much more in his price range as he’d been saving for a while and had also received some money gifts from family. He was all set to buy it when I suddenly said, “Let’s check the ratings on Amazon and see what other people think of this.”
A quick check on the trusty iPhone and it soon became clear that there was a design issue. There were ratings from irate parents complaining about the legs constantly falling off the AT-TE. I showed them to T and he put the box back on the shelf and walked away.
I didn’t realize the lesson that had been shared until a few months later when we were back in Toys R Us and looking at buying a new LEGO kit. After carefully looking at the different options and how these compared to his budget, T made his decision. He then turned to me and said, “Can we check the ratings please?”
Perfect. He has learned to do his research before buying his “want” and make sure that it is worth spending his money on it.
One thing I’d like to get better at is talking with the boys about what they have spent their money on and whether it was worth it. I need to keep a better record of what they buy and make a reminder to ask them a month later if they thought it was good value. Maybe I’ll even get them to write reviews to help others.