As your children grow up, you should teach them about money and finances as much as possible, as these lessons will be essential as they grow into adults. While you’ll have plenty of opportunities to do so, one of the best times to teach them financial responsibility is when they show interest in buying their first car.
This is a great time to educate kids about the various expected and unexpected costs of vehicle ownership, and it also allows you to teach them to budget and make the best decisions for their future. Let’s talk about this amazing learning opportunity and how to make the most of it.
Discuss Initial Costs
When your kids first come to you and say they want to drive, you have a chance to tell them all the initial cost of buying a new car. It’s an opportunity to tell them that the price they see in an ad or in an ad isn’t the whole story. They need to understand that not only will additional taxes be added, but that they can modify the total cost and monthly payments by strategically considering the down payment.
Let them know that while it’s important to budget so that they can afford their monthly payments after signing the dotted line, they really should initially save for a down payment, usually around 10%-20% of the purchase price. When they pay more upfront Their monthly payment will drop when the fee is charged. As teens, they probably don’t have a lot in their bank account yet, so they might opt for closer to 10% or less if necessary. If your child decides to buy a home, your lessons about the down payment will continue to be important.
This is also a good time to discuss the idea of accumulating debt and the need to pay it down accordingly, so they don’t face negative consequences in the future, such as a hit to their credit. Also, mention the importance of paying on time and the idea of paying as much as possible so they can address some of the interest that comes with the loan. Most importantly, let them know they have other options, like buying a used car. Doing so may not include all the glitz and glamour of a new car, but if money is tight, the initial cost may be much less.
Budgeting For Additional Costs
Too often we get so excited about buying a shiny new car that we forget about the upcoming monthly payment. However, you must teach your children the importance of planning ahead so they know what they can afford. If you haven’t already, this is a good time to show them how to budget. While they may not make a lot of money, have them jot down all the money they get from part-time jobs and perks, and then count each of their recurring expenses (dining out, time at arcade games, etc.).
You also need to take the time to educate them about road safety and what happens after an accident. It’s a good idea to go over the claims procedure and potential additional costs with your child if you are involved in an accident, regardless of whether they are at fault or not.
If they are involved in an accident, it is advisable to seek the help of a legal expert, such as Dennis Hernandez, who can assist in seeking medical and financial support. Of course, this will incur costs. However, it can help you save money and reduce costs in the long run.
Armed with all this information, they can now see how much money they have left to pay for the car. However, let them know that they also need to calculate many other costs, including the price of gas and insurance. Tell them there is no getting around it. If they drive, they must have insurance, whose cost they must include in their monthly expenses.
Due to their age and inexperience with teenage drivers, their car insurance can be more expensive, so as a parent you can choose to have them covered by yours. However, the kids should not get away with it, they should be responsible for paying their share every month. If money is tight, this is a great time to teach them to cut unnecessary expenses to afford what they need. So if that means they don’t buy the latest video game to pay for their insurance, then that’s a lesson they have to learn.
This is also a good time to teach your children that being responsible and not taking responsibility for their actions can lead to unexpected costs they may want to avoid. For example, you should emphasize the importance of driving safely and avoiding distractions on the road. Remind them that not only can texting while driving lead to a potentially fatal accident, but if caught, it could result in tickets and hefty fines they may not have factored in their budget.
Your child must also be educated about the importance of car maintenance so they can do their best to prevent unnecessary repairs. It must be said that some costs are unavoidable, such as regular oil changes and tire rotations. However, by addressing these issues now, they can avoid more expensive costs down the road, even including the possibility of needing to completely replace the car due to extensive damage.
Finally, you can teach your kids the importance of learning the skills necessary to solve car problems on their own so they don’t have to pay someone else to do the same job. Teens can do many vehicle maintenance items on their own, including changing batteries, spark plugs, windshield wipers, and changing oil. In addition to the opportunity to save money, your child may be excited to work on such projects, and this interest may lead to potential future careers.
As you can see, there is a lot to learn when your child buys their first car. By teaching the above courses, you will develop a smart and responsible driver.