Why That $5 Pen Was a Win: Teaching Kids About Wants vs Needs & Wise Choices

Teaching Kids Wants vs Needs and Wise Choices: How One Conversation Can Spark a Lifetime of Smart Decisions

The other day, my five-year-old daughter came home from school and said something that stopped me in my tracks.

Sophia: “Mama, you know what? Food is a need. But toys... toys are wants!”

She said it so confidently that I paused mid-lunch prep, smiled, and grabbed my phone to capture the moment. I hadn’t introduced this concept to her yet, so I was surprised (and impressed!)

Of course, I couldn’t let that golden moment pass without diving deeper. What started as a cute conversation about wants vs needs turned into a surprisingly deep discussion about money, choices, and compassion.

Let me take you into our living room dialogue:

A Mini Conversation with Big Questions

Mom: “Wow, Sophia! You’re right—food is a need because we need it to stay healthy and strong. So what’s a want again?”

Sophia: “It’s something you like but don’t need.”

Mom: “Okay... what if we really, really like something? Like a sparkly unicorn backpack? Should we still buy it?”

Sophia: pauses “Hmm... maybe... if we don’t have another backpack?”

Mom: “That’s good thinking! What if you already have two backpacks?”

Sophia: “Then... maybe no. Because it’s just a want.”

Then I nudged her a little more.

Mom: “Here’s a tricky one, why do you think people sometimes buy wants all the time, but forget to give money to people who don’t even have their needs?”

Sophia: quietly “That’s not fair…”

Mom: “Yeah... it isn’t always fair. But we can help make it better.

Big questions for a little heart but her thoughts were beautiful. She didn’t need a lecture. She just needed someone to listen and explore the idea with her.

Wants vs Needs in Real Life: A Book Fair Moment

A few days later, Sophia had her first real-world opportunity to practice this.

Her school hosted a book fair, and she took a small amount of money with her. When she got home, she proudly showed me a pencil she bought for $1.

Sophia: “Mama, this was a NEED. I really needed it because my other pencil is getting small!”

She gave a full explanation. I loved it. But then she pulled out a second item: a $5 pen with glitter and sponge tips.

Sophia: “Okay, this one is a want... but I just couldn’t resist it.”

She paused again and added:

“But we did talk about this before. I remembered what we said!”

That moment stayed with me. It reminded me that the goal isn’t to expect perfection from our kids, it’s to celebrate progress in their mindset.

Progress, Not Perfection

So many parents worry about “teaching it right” or making sure their child always makes the wisest choice. But kids are learning. Their decision-making muscles are still growing.

Our job isn’t to pressure or shame. It’s to guide, communicate, and reflect with them as often as we can. When your child buys something impulsively, instead of saying, “You shouldn’t have,” you can try

“What made you want that so much? ”Do you think it was worth it? ”If you had more money next time, what would you save it for?”

That kind of open-ended reflection plants seeds for better decisions tomorrow.

How to Teach Wants and Needs in Everyday Life

1. Use Real Examples from Their World

• Their toys, clothes, snacks, and even school supplies can be great conversation starters.

• Grocery shopping? Ask: “Is this a need or a want?”

• Bedtime stories? Let them pick one book that shows a character learning about value or giving.

2. Play Games and Role-Play

• Try a “Need or Want” scavenger hunt around the house.

• Use magazines or flyers for kids to cut out and sort images into “needs” and “wants.”

• I created these simple financial vocabulary cards for kids to match with the correct definition it turned out to be such a fun and engaging activity!

3. Embrace Giving as a Family Value

Talk about giving in simple, child-friendly language:

“Some people don’t even have their needs. What can we do to help?”

Even small acts like donating toys, food, or a dollar to charity make a huge impact on a child’s values.

4. Avoid Shame. Focus on Awareness

Kids will make impulsive choices. That’s how they learn. Celebrate the fact that they’re thinking about it and reflecting even if they still bought the sparkly sponge pen!

Reinforce the Concept Through Storybooks

As you know, I’m a big-time fan of storytelling, there’s something magical about how a story can open up a child’s heart and mind without making them feel judged or pressured.

When it comes to teaching the difference between wants and needs, stories are a gentle and powerful tool. They help kids explore emotions like envy, gratitude, and generosity in a safe, relatable way.

Here are a few books I found especially meaningful:

• A Chair for My Mother by Vera B. Williams – A beautiful story of saving, family, and meeting real needs after hardship.

• Those Shoes by Maribeth Boelts – One of my personal favorites! It perfectly captures the tension between wanting something everyone else has and understanding what truly matters. Here is a read aloud link

• Do I Need It? Or Do I Want It? by Jennifer S. Larson – A clear and simple nonfiction option that breaks down the concept in a way kids can understand.

  
  

These stories are great springboards for meaningful conversations, curl up with your child, read together, and let the reflections unfold naturally.

What the Research Says

According to the University of Cambridge, children's money habits start forming as early as age 7. That means the earlier we help kids build awareness, the more mindful they'll become.

What matters most is not that they always get it right but that they’re thinking about their choices, asking questions, and starting conversations.

Why “Wants vs. Needs” Is the First Step Toward Financial Education

Helping kids understand the difference between a want and a need might seem like a small conversation but it’s actually the first building block of financial literacy. Here’s a simple, ready-to-use worksheet to help spark meaningful conversations. (Available as a free download!)"

When we teach children that needs are essential (like food, clothes, and shelter), and wants are nice-to-haves (like toys, bubble gum, or a light-up pen), we’re introducing them to the core ideas behind smart money habits: decision-making, prioritizing, saving, and even giving.

But here’s where it gets more interesting and where the real teaching magic happens…

How to Teach: “It’s Okay to Have Wants” – With Balance

This is often the trickiest part for parents and educators. We don’t want to guilt kids into avoiding all fun or joyful spending, especially when they can afford a small treat. At the same time, we want them to learn how to make thoughtful decisions, even in a world full of sparkly, squishy, light-up things calling their name.

Here’s how we can make that happen:

1. Use a “Wants Are Not the Enemy” Message

Let your kids know:

“Wants are part of life! We all have them even grown-ups. The key is learning when and how to enjoy them, and making sure we don’t forget our needs or our values in the process.”

This helps kids feel safe talking about their wants without feeling judged or pressured to be perfect.

2. Introduce the Concept of “Wise Wants”

Create a new, powerful category called: Wise Wants = Things you want and can enjoy because you’ve:

• Met your needs first

• Thought about it for a while Saved up or budgeted

• Made space for generosity (donation/helping others)

This way, we’re not teaching kids to avoid wants. We’re teaching them how to approach wants with confidence, patience, and purpose.

Instead of,

“Don’t waste your money on that!”Try:“Hmm… is this a Wise Want?”

When kids learn to pause and ask this kind of question, they’re practicing the exact kind of money mindset that grows into financial resilience later in life.

Why I Created This Financial Literacy Resource Bundle

It all started with a conversation between me and my daughter, Sophia.

That one moment led to many thoughtful (and often very funny!) discussions with my own kids. I began tossing out different real-life scenarios at the dinner table or during car rides, just to see how they would think through them. Some were easy. Others? Definitely tricky.

Their answers surprised me, challenged me, and inspired me.

And that’s when it clicked — what if I turned these conversations into a resource for families and classrooms? Something that could spark curiosity, critical thinking, and financial awareness in a fun and approachable way?

That’s how the Wants vs. Needs Financial Literacy Bundle was born.

It includes:

• 14 Thought-provoking scenario cards (with reflection questions!)

• Interactive worksheets

• Financial vocabulary cards for K–5

• PPT presentation

all designed to help educators and caregivers make these money moments meaningful.

If you're a parent, teacher, or caregiver looking for an easy and engaging way to start conversations about money, values, and wise choices this resource is for you.

Check out the full bundle on my TPT store and get ready to open up some truly powerful conversations with your kids.

And yes I print and cut vocab cards and girls played match the definition game.

Final Thought

When Sophia told me she remembered our discussion before buying that sparkly $5 pen, I realized something: this is exactly what growth looks like.

It’s not about saying “no” to every want. It’s about noticing the difference, making thoughtful choices, and learning through experience.

And as parents and educators, if we keep those conversations going lightly, warmly, and consistently we’re helping shape kids who will be thoughtful, generous, and smart with their money in the future.

Big hearts grow with small conversations.

Financial education isn’t about perfection, it’s about progress

Over to You:

Have you had a moment where your child surprised you with their thinking about needs and wants? I’d love to hear your story in the comments!