Financial Literacy—Needs and Wants | Learn about needs, wants, and opportunity costs

Summary

This video helps kids understand the difference between needs and wants in financial literacy. It explains that needs are essentials like food and shelter, while wants are non-essentials like toys or games. Using a scenario with Frankie, the video demonstrates how to make decisions between spending money on wants, like rollerblades or a movie, and the concept of opportunity cost. It encourages kids to weigh their options, create pros and cons lists, and practice making financially responsible decisions, all while emphasizing the importance of financial literacy.

Takeaways

• 😀 A need is something essential for survival, like food, water, shelter, and basic clothing.
• 😀 A want is something non-essential, like toys, games, or trendy items like expensive sneakers.
• 😀 Understanding the difference between needs and wants helps make better financial decisions.
• 😀 Financial decisions often involve choosing between needs and wants.
• 😀 Opportunity cost refers to the cost of missing out on the option not chosen.
• 😀 An example of opportunity cost is choosing between buying rollerblades or going to the movies.
• 😀 Frankie earned money from activities like mowing lawns and running a lemonade stand.
• 😀 Frankie has to decide whether to buy rollerblades on sale or go to the movies with friends.
• 😀 If Frankie buys the rollerblades, she won’t have enough for the movie; if she goes to the movie, the rollerblades will no longer be on sale.
• 😀 Making decisions like these involves personal choices based on what one values most, whether it's items or experiences.
• 😀 To make better decisions, try listing pros and cons to evaluate different options before choosing.

Q & A

What is the difference between a need and a want?

A need is something necessary for survival, like food, water, shelter, and basic clothing. A want, on the other hand, is something that would be nice to have but is not essential for survival, like toys, games, or new clothes.

Why is it important to understand the difference between needs and wants?

Understanding the difference helps people make better financial decisions, as most financial choices involve either a need or a want.

What is an opportunity cost?

An opportunity cost is the cost of missing out on an option you didn't choose. It refers to what you give up when you make a decision.

Can you give an example of opportunity cost from the transcript?

In the transcript, Frankie faces an opportunity cost when choosing between buying rollerblades or going to the movies with friends. If she goes to the movie, she won't be able to buy the rollerblades on sale.

What financial dilemma does Frankie face?

Frankie needs to decide whether to buy rollerblades, which are on sale, or to go to the movie with her friends. If she buys the rollerblades, she won't have enough money for the movie, and if she goes to the movie, she misses out on the sale.

What is the total amount of money Frankie has to spend?

Frankie has $45 from mowing lawns and running a lemonade stand, plus $20 from her grandmother, totaling $65.

What factors should Frankie consider in her decision?

Frankie should consider the opportunity cost of each option, whether the rollerblades will still be available at the sale price later, and which option provides the most value to her.

How can Frankie make a more informed decision?

Frankie can make a list of pros and cons for each option to weigh the benefits and consequences, helping her decide what works best for her.

What would happen if Frankie chooses the movie over the rollerblades?

If Frankie chooses the movie, her opportunity cost would be not being able to buy the rollerblades on sale, as she would not have enough money.

What advice does the script give for making financial decisions?

The script advises that when faced with a decision between two or more options, it's helpful to list the pros and cons of each choice, which can guide you toward a financially responsible decision.