When to Step In and Help Your Teenager With Their Car Purchase
Posted in: Driving Tips.
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As a teenager, getting a driver’s license is a right of passage. Getting your first car is another major milestone, and 92% of teens want to own their own vehicle. While your teen probably isn’t going to be rolling off of a car lot in a Tesla, they might be excited to make the purchase on their own.
It’s not a bad idea to let your teenager try to buy their first car by themselves. It teaches dedication, responsibility, and shows them what it takes to save money. They’ll have to work hard to get enough money to afford it, and there are plenty of lessons to be learned along the way.
But, as a parent, it’s natural to want to step in and help your teenager out, especially if you see them working hard to save. It’s not uncommon for parents to give their teens a loan so they can buy the car they deserve now and pay for it over time.
Is that the right thing for you and your teenager? If you decide it is, when is the best time to step in and help?
Help Them With a Budget
The average price for a used car is just over $25,000. While you can certainly find cars much cheaper than that, your teen needs to have a reliable car that they can depend on. One of the easiest ways to help them with their car purchase isn’t necessarily to give them a loan but to teach them how to budget.
Sit down with them and go over all of the expenses that come with having a car. It’s more than just the initial purchase. They’ll have to think about paying for gas, insurance, and even maintenance and repairs.
Having everything down on paper can help your teenager see just how much money they’ll need to make each month to stay on the road. Having a clear budget can also make it easier for your teen to set goals. Maybe you’ll even inspire them to study for a career in accounting to take charge of their financial future.
Creating a budget with your teenager can also motivate them to get a job if they’re not already working. Before and especially since the pandemic, U.S. businesses have been struggling to find workers. Right now, your teenager could probably find employment quite quickly, whether it’s at a fast food establishment, a retail store, or even as a tutor. When they start seeing their budget shift as they make more money, they’re more likely to stay motivated about work so they can reach their goals faster.
Stepping in to Help
There’s no ideal situation for you to step in and help your teenager with money. Ultimately, you decide to offer them a loan or not. The most important factor in your decision should be knowing if they are financially responsible. Some signs that can give you peace of mind in offering them a loan include:
- They work at a part-time job
- They keep their grades up in school
- They’re involved in extracurricular activities
- They’ve asked for/have their own bank account
- They save most of the money they make
- They have their own financial goals
When your teenager understands the value of money, they’re more likely to be responsible with it – especially if they have a savings goal in mind. If you choose to offer them a loan when you know they can handle money, you can feel confident that they’ll pay off the loan in full. You can use it as another financial lesson for them. You probably won’t end up charging interest, but you can offer a certain amount and allow them to take care of the rest.
They’ll be responsible for car shopping, which includes finding a vehicle in their price range that is reliable and safe. This process offers them your assistance while still putting them in the driver’s seat (literally) to make their final choice.
The Importance of Financial Responsibility
Encouraging your teenager to save money should be a top priority. It’s one of the most important skills they will take with them into adulthood. Teaching them to save will help them on the path to financial security, and includes benefits like:
- Sensible spending habits
- Making money-saving a habit
Not only can you teach them how to save money, but you can teach them different ways of saving – like investing. While you may not want to give them money for a car now, you can invest some of your own money for them in a high-yield savings account or a certificate of deposit (CD). Over time, these investments gain interest, and your teenager will be able to use them toward something as an adult.
You know your teenager better than anyone, and you’re also in charge when it comes to giving them money or not. Buying a car creates an appreciation for money and saving, so if you set terms to your loan or create conditions for giving them money, they’re more likely to take the help seriously. If you feel like they’ve earned a little help, don’t be afraid to offer it. You might be pleasantly surprised at how well they manage the money you give them, and how appreciative they are as they drive their first set of wheels.