An automobile is one of the first major purchases a young person will make. It can be a good chance for a parent to reinforce a sense of responsibility and introduce their child to financial decisions. As your son or daughter looks towards their first vehicle purchase, there are things you can do to help them make the right choices.
Decide what is best for your family
Some people say you will spoil a teenager if you provide them with his or her first car. Others suggest forcing students to take classes, attend after-school activities and work a part-time job to save money loads them with too much responsibility. The truth is, every family is different and you need to decide on the car-buying plan that is best for you.
The Christian Science Monitor reminded its readers that no matter what financial plan you make, whether you gift your kid a cheap, practical hand-me-down or split payments with them, there are lessons of responsibility and practicality that can be taught.
You want to introduce the concept of car ownership well before your kid gets the urge to jump behind the wheel. As soon as they hit their teenage years, you should talk to your children about whether or not they'll want a car the second they get their driver's license, or if they want to hold off on ownership until they leave home.
As they make their decisions, you can provide them with you own experience and suggest they look into additional information themselves. If they are raring to get behind the wheel of their own vehicle, then it's never too early to begin saving.
Talk to a banking expert about the best kind of account for saving for particular purchases. Take your son or daughter with you and encourage them to start a savings account to accrue money for their future automobile purchase. By giving them a specific goal to keep in mind, you can provide your son or daughter with an informative banking and borrowing experience.
"This can be your child's introduction to budget creation."
Talking about finances
Make sure your child is aware of all the finances that go into purchasing a car. First of all, see if they are interested in buying the car outright or looking into auto loans. Your banker can help with loan options and can assist you in finding the best financial choice for a first-time borrower. Auto Trader reminded parents that a car is the perfect chance to introduce your son or daughter to the concept of a credit score. You can help them avoid decisions that will hurt their financial future.
Outside of the car purchase itself, you want your kids to think about the other monetary concerns of car ownership. This can be your child's introduction to budget creation. He or she needs to plan for the cost of gas, possible repairs and auto insurance.
Auto insurance could be a pretty jarring monthly payment for a teenager working a part-time job. If you are already paying for your kids to drive your vehicles, you might want to add the new car's insurance to your policy. If you do this, be transparent with your kids about how much the insurance is costing you. Your son or daughter should be kept in the loop about every step of the process, even the parts you are paying for.
Select the right car
With very few exceptions, you probably don't want your kid driving a brand-new car. Teenagers are prone to accidents and their initial vehicle should stress function over form.
Bankrate suggested there are car options that are better suited for young drivers. Teenagers dealing with a budget for the first time should look for vehicles with good mileage that won't require a lot of upkeep. When buying used cars, look for quality and be sure to check out all the seller's claims. You should be demonstrating good purchasing habits.
As a parent, you'll want to look at brands that promote safety. You can search online for the crash-test results and reliability ratings of particular vehicles.
Share the responsibility
You and your child should both be involved in this process, no matter what purchasing plan is chosen. If you are buying the car yourself, let them know how much it cost and the steps you took to buy it. If they are paying for their own car insurance, help them shop around for the best rates.
Your experience and guidance can set your kids on a path toward strong financial habits that will keep paying off down the road.
For more information about smart ways to manage your finances, contact Landmark Bank.
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