Here we go again! For the third time now we are embarking on the journey of teaching a teenager how to drive, and in doing so, another car purchase is on the horizon. Last year, I published this article on how to buy your teen a vehicle without it putting you into debt or financial strain. Now that we are facing this event again ourselves, I want to revisit the topic.
Two hundred dollars. That’s what my husband, Don, paid for his first car. It was an unglamorous 1969 Chevy Nova sedan, and he bought it in 1981. He got a job as a gas station attendant and was able to save up enough money to buy the Nova in a fairly short amount of time. It was basic transportation, but it got him from point A to point B.
He kept working and saving until he could upgrade to his second car, a blue, 1969 Chevelle Malibu coupe, a somewhat sportier and more attractive alternative to the Nova. For that, he paid a whopping $600 in 1982. He rebuilt the engine and replaced the transmission in it, and it lasted him through college. We went out on dates together in that car.
Most teenagers want a set of wheels. Whether they want a car or pickup truck or SUV, most teens have some idea of how they want to get around town. It’s probably not in a $200 car, so how will they afford something they want?
Money management is something every teen should learn, and that means not just spending, but saving, budgeting, and investing.
Helping your teen save money to buy a car is a fantastic way for her to learn the art of money management. It shows her she has the power to make her desires happen.
It teaches her to plan for what she wants instead of just dreaming about it, and it teaches two key principles – discipline and responsibility.
Here are 5 tips for helping your teens put their dreams of vehicle ownership into motion.
Start saving as early as possible
Your first grader should be saving for a car. As soon as he can understand what you are doing, take the child down to the bank and open up a savings account. Obviously it will be a custodial account, but the child needs to understand the account belongs to him. Show him the bank statements with his name and the account balance when they come in the mail. When it’s time to make a deposit, let him fill out the deposit slips. Involve him in the process.
Why first grade? Time is on your side if you start early. When kids have their own car savings account, they will stash away birthday, Christmas, or chore money because there will be an incentive in place to encourage the saving mindset. Think of the peace of mind you and your teen will have when you know there is a car fund started long ago and steadily grown over time.
Also, if a child is saving for a car all throughout his memorable lifetime, he has a lot of “skin in the game” so to speak. There is a lot more at stake if he has been saving for a while, and he will be far more likely to appreciate the car and take good care of it. We have observed this phenomenon first hand in our family.
I hope I got to you soon enough on this one. If not, don’t panic. There is still time for your teen to save up some money for a car if she is diligent and dedicated to the prospect of being mobile. Remember, Don’s first car cost $200, which is equivalent to about $550 today. Start saving now.
Know your car market
Encourage your teen to familiarize himself with the car market in your area. Do this together. Know how much certain cars cost so your teen can be realistic about what he might be able to afford. The key is to be realistic. Most teens should not expect to have a brand new car right off the bat. You don’t ever want to saddle him, or yourself, with payments. Study the used cars online so he can get an idea of what he can expect to find.
Know your budget
Figuring out how much your teen needs to save is vitally important. Set a goal and a time frame for earning and saving the money she will need to buy the car she wants. If you have done step 2, knowing your market, then you and your teen will be able to decide on a budget that makes sense. Once you decide, stick to it!
Match their deposits
If they save it, you can help them out by matching it if possible, especially if it is earned income.
This is a Dave Ramsey principle, and it works well if parents can afford to do it. It is similar in concept to a 401K plan at work. The child earns money and whatever she saves in her account, Mom and Dad match it with an equal deposit. It is great incentive for the child to save if the deposits are doubled. If you can’t match it dollar for dollar, at least contribute what you can. They will appreciate any help you can give them.
Encourage them to work
Just like Don, they can go to work. In addition to working a regular job, teens can earn money by doing all sorts of jobs that do not necessarily require them to be sixteen. Baby-sitting, pet-sitting, mowing yards, raking leaves, shoveling snow, cleaning windows, washing cars, and pulling weeds, to name a few, are all possibilities for earning some cash to stash away for that car.
Whether you want to admit it or not, your teens will be driving before you can blink, if they aren’t already. Making a solid plan for finding reliable, affordable transportation is one more step forward in your 7 Year Adventure. Make it a fun and educational experience for them.
If you found this post helpful in any way, please scroll down and leave a comment in the section below. Tell us some of your unique ideas for how your teen paid for his first car, or how you paid for yours. Also, visit the Resources page for a list of books on teaching your kids good money management.