Teaching Teenagers Financial Responsibility Through Their First Car Purchase
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Teaching your child to drive is an exciting moment in life. There are few more defining events in the transition from being a child to becoming an independent adult. As a parent, it’s tempting to do everything in your power to feed that desire for your child to “spread their wings and fly.” After all, you want them to branch out and begin to conquer life on their own, right?
This leads many parents to get overly invested in their childrens’ first car purchases. From loaning funds to straight-up buying them a new car in cash, it’s tempting to find a way to get your kid their own set of wheels as quickly as possible.
Before you get out that checkbook or raid your savings, though, take a minute to slow down and consider your options. A first car isn’t just an exciting chance to expand a child’s itinerant independence. It can also be an amazing opportunity to hone their financial abilities.
With that said, here are a few of the benefits that come with teaching financial responsibility through a teen’s first car purchase.
Buying a Car Creates an Appreciation for Money
Money doesn’t grow on trees. But it might as well do so if you plan on handing your kids the keys to their own cars without a second thought to the price tag.
However, if you have them earn the money to purchase the car themselves — even if you still help them along the way with a matching plan or shared expenses — you can teach them a critical lesson in the appreciation of money. This isn’t referring to an obsession or love of money. On the contrary, learning what it takes to purchase a car can be a sobering experience that helps set the stage for future financial decisions.
Buying a Car Teaches Savings
Setting a realistic budget, saving cash, and coming up with funds are all important aspects of buying a car. The process of saving up enough money to purchase their own car can provide your child with an impactful lesson on how tough it can be to save money.
Patience, endurance, and discipline are all required and can help enhance your child’s financial responsibility as they learn to save a larger sum of money.
Buying a Car Expands Financial Acumen
The process of obtaining enough money to buy a car naturally exposes your child to a variety of financial lessons. Understanding the difference between cash and financing through a loan, paying interest, setting up recurring payments, and the effects of both savings and debt are all-powerful life lessons.
Buying a Car Builds Credit
If your child finances their first car through a loan, they will quietly begin to benefit from the long-term effects of proper debt management. As they make payments on the loan, their credit will begin to build. Taking out a loan at a younger age allows them to establish a credit history as early as possible.
Buying a Car Unpacks the Complexity of Car Ownership
Owning a car is a very complicated experience. It doesn’t just involve buying the car itself — which is already rather convoluted as it is. It also includes navigating car insurance, repairs and maintenance, and paying for fuel.
Additionally, if your kid is initially denied a loan, it provides him or her with a valuable chance to learn about how to overcome money challenges. They may need to build their credit, decrease their debt, or even simply review their application for errors. Regardless, the experience will help them learn about the intense complexities that come with owning your own car.
Buying a Car Enhances Their Skillsets
If your child purchases a car, the financial reverberations will go much further than their transportation needs. They will learn crucial hard and soft skills about money management, organization, and responsibility.
They may even find that they enjoy the experience. This could open up the doors for a future career in finance, such as becoming a financial analyst or a personal financial advisor.
Preparing for Your Child’s Financial Future
Purchasing your child’s first car shouldn’t be viewed as a bother. Instead, treat it as a valuable opportunity to set them on a healthy financial path. Let them get intimately involved in the process. Don’t hesitate to shift a portion of the responsibilities onto their shoulders.
They may not love the initial feeling, but learning to do things like research car models, compare new versus used options, factor in insurance and interest on a loan, and so on will all help shape their ability to manage their finances in the future.
So pause before you plunk down a chunk of change in the name of smoothing the way for your child to get their first car. Consider how you want them to get involved, and then use the experience as a chance to teach them one of their first major financial life lessons. Given time, they’ll be glad you did so.