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Not every family owns a car, and not every kid is ready to get behind the wheel. But in most places in the U.S. and Canada, 16 is the magical age when the person who was once your baby is legally allowed to drive.
We are as frightened by this prospect as you are.
Start Here.
Let’s start with the budgeting piece. If your 16-year-old is cutting out Aston-Martin pics for their vision board it’s a great time to remind them that at no point should transportation ever take up more than about 15% of a monthly budget.
Get This.
If your kid is vying to borrow the family car, leverage the teaching moments for all they’re worth.
- Charge them for car insurance. Your kid is a new driver and, let’s face it, you’ll think they’re a menace behind the wheel until they’re 50. Charge them insurance to help get them accustomed to costs associated with owning your ride, to insure your peace of mind, and to help ease the sting of your premiums going up now that you have a teen driver in the house.
- How much do you spend for gas and routine maintenance? Will your teen pitch in for gas?
- How much are your monthly car payments? Do you own or lease, and what are the advantages of each? If you have a car loan, how much will you end up paying in interest over the course of the loan? Maybe your teen can cover the interest.
Keep Going.
There are a lot of household costs that start to pile up at 16 — food for ravenous appetites, higher insurance costs, clothes and sporting equipment. If you think you’re doing your teen a favour by shouldering it all, Jerald G. Bachman says maybe not.
Bachman, a University of Michigan professor and an expert on behavior during the transition to adulthood cautions that kids who have cash to splash around on non-essentials while parents cover the basics can fall prey to “premature affluence”. It’s an inaccurate experience of the world that can really chip away at a young person’s financial literacy. Financial literacy actually deteriorates if it’s not put into practice, so get practicing. Have your teen find ways to contribute to household finances, their sports equipment, or their investment account.
We particularly like Option Three.
