Teaching our kids about NEEDS vs WANTS is a crucial part of teaching financial literacy. Using Maslow’s Hierarchy of Human Desires could be a good way to guide you as your kids go through different stages of life.
What Is Maslow’s Hierarchy?
Maslow’s Hierarchy is a psychological theory where human needs are arranged in a pyramid of five levels, with the most basic needs at the bottom and higher-level desires at the top. Here’s a quick overview:
Physiological Needs: At the base of the pyramid are fundamental requirements for survival (ie. food, water, shelter, sleep).
Safety Needs: This includes the need for personal security, financial stability, and overall well-being.
Love and Belonging: This includes the need for mental and emotional well-being (Relationships, friendships, and the sense of belonging)
Esteem Needs: This includes self-esteem, confidence, and the desire for recognition and respect.
Self-Actualization: At the top of the pyramid is the desire for personal growth, creativity, and achieving one’s full potential.
So how do these principles apply to teaching financial literacy to young children? Through the lens of Maslow’s Hierarchy, you can cater the idea of NEEDS vs WANTS to the developmental age of your children:
Teach kids about basic needs like food and shelter. Explain that we work to earn money to provide these necessities
Use games and activities to introduce the concept of budgeting by giving them a small allowance and helping them allocate it for snacks, toys, and other small desires
Introduce the idea of saving money to meet future needs or emergencies. Set up a "savings jar" and encourage them to save a portion of their allowance.
Explain the importance of delayed gratification, where they can choose to save for something special rather than spending impulsively.
Love and Belonging
Talk about how financial decisions can affect relationships and family well-being. Discuss common family expenses and how they contribute to the household's safety and happiness.
Encourage them to consider how they can contribute to the family's financial security by being responsible with their own money.
Discuss the role of money in achieving personal goals, like pursuing higher education or starting a business.
Teach them about investing and how their financial decisions can impact their long-term financial security and self-esteem.
As your children grow older, encourage them to explore their passions and career interests. Discuss how financial planning can help them achieve their dreams.
Teach them about setting financial goals and creating a long-term financial plan to support their aspirations rather than succumbing to short term whims.
Maslow’s theory reflects the natural progression of human desires, starting from basic survival needs and progressing toward higher-level aspirations. By using this framework, we help children understand the intrinsic connection between financial choices and the fulfillment of their desires. Research has shown that teaching financial literacy at an early age can positively impact children's financial behaviors in adulthood. It equips them with the skills to make informed financial decisions, avoid financial pitfalls, and build a secure financial future.
Parents should also lead by example and demonstrate responsible financial behavior. By openly discussing saving strategies, budgeting, and financial decision-making, parents can provide valuable insights and teach their children about the long-term benefits of delayed gratification.
Bonus Tip: Financial Literacy Resources
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