Including Kids in Car Ownership Economics
Tuesday, 16 July 2019
Most families have always had at least one and when they turn 16, they'll likely either have a car of their own or have access to a family vehicle. But most adults know all too well how expensive cars are to purchase, insure, and maintain—and kids need to understand this.
Teaching children about money is an important part of preparing them for adulthood. New drivers are very interested in having a car, and this gives parents the opportunity to teach kids about the cost and responsibility of owning and operating one.
How much cars cost
To help young adults understand how much money this is, show them what percentage of your monthly budget goes to car payments. You can also explain if they made $10 an hour, they would have to work more than 50 hours a month—or more than 10 hours a week—just to make the car payment.
The importance of insurance
If you haven't already, it's time to explain how insurance works—and how much it costs. The average individual monthly auto insurance premium is $150. This varies widely depending on the state, type of car, coverage, age of driver, and driving record. But $150 is a good number to discuss with young drivers.
Once your child has an idea of how much insurance costs, let them know their actions directly impact that number. Explain that insurance rates can rise dramatically if they get a speeding ticket or other citation, or if they have an accident. The average premium increase after filing one claim is 41 percent. Showing them the actual numbers can help them better understand the implications of driving mishaps.
Many insurance companies also offer discounts for students with all As and Bs. This means keeping their grades up can help save the family money.
Additional costs of owning a car
In addition to the car payments and monthly insurance, they need to realize gas, repairs, tires, maintenance, cleaning, and taxes can add hundreds of dollars each year to the total cost of a car. Teaching children about responsible car ownership is essential to understanding the full costs of owning a car.
How kids can help
Many financial and parenting experts can agree that handing a kid the keys to a new car on their 16 th birthday doesn't necessarily promote financial responsibility. Even if you can afford to buy a car for your child, help them learn the value of work and money by finding ways for them to contribute to the cost and care of the car.
The unemployment rate among teens can make it difficult for new drivers to help with the monthly car payment. But if they do work even a few hours a week, a portion of the money can go toward gas or insurance. Or a percentage of their allowance can be earmarked for auto expenses. At the very least, they can be responsible for cleaning the car on a regular basis.
A teaching moment
When young people first get their license, they're eager to drive. Parents can leverage this enthusiasm to help their children understand the total cost of auto ownership, and hopefully find ways for them to contribute to the maintenance and care of the vehicle. Ideally, these are lessons that will stay with them for the rest of their lives.
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