Day in day out we are faced with different choices we have to make; choices such as where to go, when to go, what job to do, what career path to take, friends to keep, what to wear, what to read, what to listen to, etc. Sometimes it gets so difficult to make these choices and this is because we didn’t get to learn the art as early as possible in life. If children are encouraged to make choices, making decisions as they get older will be easier because they will have the necessary experience and confidence.

Very young children can analyse and make a choice between two options; for example: “Would you like chocolate or vanilla ice cream?” or “Do you want me to buy you potato chips or biscuit?” Even though these choices are relatively easy, making these simple decisions is great practice for little kids.

Part of making good spending choices is being aware of the difference between needs and wants. Explain to your child that it’s your job to take care of his or her needs. Adults in the family will pay for things such as nourishing food and housing. After all the needs are paid for, the family might have some money left over for wants. Since we usually have more wants than we can afford, we have to make choices and decide what we really want the most. This will help kids to learn at an early age that human needs are insatiable and that people have to make spending choices.

As kids get older, they can select from a greater number of alternatives. Start a conversation with older children by asking them to make a list or name some things that they would like to have. The list, which could be quite long, might include things such as:
• A bicycle
• Board games
• Books
• Candy
• Electronics
• Music
• Toys
• Video games

Discuss that some of the wants on the list cost less money, such as the candy, and other things, like the bike, mobile phone, tabs, etc. are more expensive. Explain that people have to sometimes choose between buying several inexpensive items or one expensive item.

Ask your child to choose the one item that is most important. Chances are, this will be very difficult since he or she may really want everything on the list. To help your child make a choice, ask him or her to think about each item, listing reasons to buy each and reasons not to buy each. If deciding about a video game, for example, your child might come up with something like:

• Reasons to buy – my friends and cousins have it; it looks fun; I am alaready bored with the toys I have and need something new
• Reasons not to buy – I can play it at my friend’s house; I have a lot of video games already; it costs a lot of money; It is not as important as other things that I need currently

Help your child eliminate some of the wants from the list by using this process, until the list is down to a manageable number of items. Kids tend to make the best choices if their own money is on the line. Even if they are only expected to make a small contribution toward the purchase, knowing they have to spend some of their own money might make it easier to make a choice.

You can encourage good spending choices by letting your child hear you ask questions such as, “Do I need to buy this now? Would this cost less somewhere else? Can I borrow this from the library or from a friend?” If your child knows that you are putting a lot of thought into each spending choice, he or she may be more likely to do the same. If your child is using his or her own money, you can help him or her evaluate the choices, but (within reason) leave the decision up to your child.

– Gbonjubola Sanni

Adapted from: http://www.investopedia.com/university/teaching-financial-literacy-kids/teaching-financial-literacy-kids-spending-choices.asp