Use Your Child’s First Car as a Financial Learning Tool

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Most teenagers reach 14 or 15 and start dreaming of driving a car of their own. You could do what some parents do and purchase the car, the insurance, and give them money for gas but if you want to raise them with financial wisdom, covering all of their expenses isn’t the right plan. Here are a few ways to use the car as a financial education tool.

“Train up a child in the way he should go…” (Proverbs 22:6)

Match their Savings

Instead of purchasing the car, offer to match what they save on their own. If they can save $3,000, offer to give them another $3,000. For a teenager, a $6,000 car will get them around town safely and appropriately. Giving them skin in the game makes them more likely to take care of the car and it teaches them how to save. Saving $2,000 over the course of 2 years means saving about $83 per month–for you and your child.

You Buy the Car, They Buy the Gas

Consider a plan of shared expenses. Maybe you offer to buy the car if they pay for the gas and insurance. Whatever you find appropriate and realistic for your financial situation, lay it out for your child. Create a contract to teach them how to read, evaluate, and commit to formal agreements, and let them know that if their bills aren’t paid, the car will be taken away. (Because that’s how the “real world” works.)

You can also use the arrangement to teach them how to shop for car insurance, find good deals on gas, and saving extra money for routine maintenance.

Also read: 15 Quick and Sometimes Drastic Tips for Getting Out of Debt

Speaking of Maintenance

Car Maintenance

Offer financial incentives if they keep up on routine maintenance

How many adults don’t keep up with routine maintenance only to find themselves with major repair bills later? We all know that getting the oil changed, tires rotated, and filters changed costs money but it’s nothing compared to the cost of repairing problems that arise from lack of routine care.

Your child should understand this as well. Consider a deal like this: If they show you that they’re paying for oil changes and other low cost maintenance based on a clear plan you lay out, you will pay for any needed repairs.

A deal like this forces them to save money for upkeep and take care of their car in a responsible way. (This includes keeping it clean.)

Set Basic Rules

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Create rules that prevent distracted driving.

Of course, stress that these rules are non-negotiable:

  • No cellphone use of any kind while driving;
  • Nobody else may drive the car;
  • Grades are too low;
  • behavior issues;
  • lack of serving in a church ministry.

Positive Reinforcement

The insurances companies do it–you can too. Offer extra money, a month of free insurance or other incentive if:

  • They achieve all As (or other achievement) on their report card;
  • No accidents or tickets for a year;
  • Volunteer (x times) at a shelter or charity;
  • Pick up somebody less fortunate and take them to school or church;
  • Other positive behaviors.

Finally

Is it mean and heartless not to pay all of the expenses that come with driving? You’re called to “train up a child in the way he should go.” (Proverbs 22:6) This includes financial education. Buying everything is like doing their homework for them–they’re happy now but fail to learn the valuable lessons they will need later in life.

As always, teach them the realities car ownership but don’t make it all about rules and the negatives that could happen. Keep it positive, use it as a tool to build their confidence, and constantly praise them for acting responsibly.