W!SE Financial Literacy Certification Practice Test 2025 – Complete Exam Prep

In financial terms, a 'need' is defined as something essential for survival. This includes basic necessities such as food, water, clothing, shelter, and healthcare. These items are crucial for maintaining one's health and overall well-being, and without them, a person would face serious consequences.

Understanding the distinction between needs and wants is fundamental to financial literacy, as it helps individuals prioritize their spending. Needs are non-negotiable, whereas wants include items that enhance comfort or enjoyment but are not essential for survival. For instance, luxury goods or treats serve to improve quality of life but do not meet basic human requirements, highlighting why they do not qualify as needs. Recognizing this difference is vital for effective budgeting and making informed financial decisions.