“How do you teach children the difference between wants and needs?” a viewer texted ABS-CBN’s Shoptalk yesterday after host Pia Hontiveros and I spent the better part of an hour talking about financial literacy for kids.

The studio lights felt warm on my face and the ticking clock made me mumble a couple of excuses for an answer. My daughter and best critic who was watching assured me I did good, but in the harsh reality of 24-hours-after, I am now mortified at how I missed the opportunity to dissect a very important personal finance dilemma for parents.

Forget teaching most adults about wants versus needs. Most of us are hopeless. But children? The spending habits we instill in a child will make more impact on his financial life than any investment he may make in his future. I can’t even begin to explain how critical it is for a child to have a clear grasp of this concept.

How? I search inward at my own parenting efforts. Have I been a good example? Have I taken the time to at least discuss the seeming lack of difference between a need and a want at the exact moment the wanna-have-it gremlins are making such a ruckus in his mind? That when he is an adult, he would be torn between bigger things than a Timezone caper or a drum set? That eventually, his decisions now will define him as a person later on?

In hindsight, here are the things that I think I should have told that viewer and that I aim to do more often in the future:

1. Teach him to delay the purchase and take time to think together. An infant needs instant gratification. When he cries for a feeding or because he hates the feeling of a soiled diaper, or when he wants a cuddle, I believe parents should give it to him immediately. A child, on the other hand, has to start learning the survival skill of thinking first if his desires need to be instantly gratified or not. While foremost a money lesson, this will also later on develop in him the crucial values of sacrifice and giving way to a greater good. So, take time outs. One day or two days will make a huge difference in extracting him from the pressure of the spending situation and teaching him to think about whether something is a want or a need.
2. Consider options and learn the art of being a thinking spender. A child is best taught when things are visual. List down possible options. With P5,000 given by relatives last Christmas, what are the things that he can buy? Allow him to visualize and compare prices. Let him think about what is more practical.
3. Let him think about long-term goals. Would it be better to save the P5,000 and make it grow so he can buy something he really needs? Try to teach him about compound interest and see if he wants to grow the P5,000 by investing it in a time deposit or a mutual fund.
4. Bring him to the grocery and show him how substituting works. Take advantage when the kids want to help with the grocery! At a certain age, they just want to leave that chore to mom. But while they still want to push the cart, incorporate a lesson on how substituting items can bring down the grocery bill. Come to think of it, there have been several times when the kids have saved me a couple of hundred pesos in the grocery.
5. Give him rewards when he saves instead of spends. Double his savings or give him treats. Appreciate his efforts when he asks for an opportunity to earn money to “feed” his mobile phone instead of just asking for “load”. When they feel good about doing something, they stick with it longer.

Re-reading my list, I realize kids are not the ones who will benefit from it. Do you have any you want to add?

The other guests in the show were Pioneer Life senior vice-president Rolly Robles and Blue Cow chief operating officer Nanjo Berba. They talked about an interesting financial literacy course for children both companies have designed to create savers out of the younger generation.

Pioneer Life and Blue Cow have also developed a comic book called Private Iris that uses the Nancy Drew/Hardy Boys-type plots to teach young ones about saving and investing. Watch a video of an interview by INQUIRER.net multimedia specialist Erika Tapalla with writer Jaime Bautista.

I thought it was interesting that a financial services company is giving back to the community via education. It’s a good marketing move as well as this actually enlarges the market for life insurance and other financial services.