How To Teach Your Teen The Cost Of A Owning A Car And Budgeting For Driving Expenses

If you have a teen in the house who is just starting to learn how to drive, now is a very good time for some "tough love." Instead of giving them a car and paying the title and registration and insurance on it for them, you can make them learn some valuable life lessons about money and responsibility. Here is how you can teach them these invaluable life lessons.

Go Car Shopping, Select Five Cars Your Teen Wants and Talk to an Insurance Agent

Lesson one is learned when you take your son or daughter car shopping. Have him or her pick out five cars, any five cars with any sticker price. Now call your insurance agent and have your son or daughter speak to the agent about these cars. The agent can run insurance quotes for each of these cars, based on the information your son or daughter provides. Because different cars generate different monthly insurance premiums, your teen will learn quickly how his or her choice in cars can impact the cost of insurance. Then he or she will be sure to select something he/she can afford.

Next, Sit Down and Figure out How Much Money Would Have to Be Earned

Budgeting is a huge skill to learn. It does not just cover housing and food, but transportation and related costs as well. In learning to budget for a car, your teen learns how much money he or she would have to make per hour (wages), and then how many hours per week/month he/she would have to work to make enough money. Remind your teen that it is not just about the cost of the car he/she is saving for, but also the cost of the insurance as quoted by the insurance agent for the car he/she selected.

There is also the cost of the title and registration, taxes and gas. Title and registration and taxes on purchases are constants and only need to be figured in annually or once, respectively. However, the cost of gas is a new budgeting skill, since it rises and falls weekly. Have your teen work out a gas budget based on gas prices from the last three months, or based on the average price of gas from the last several weeks. Once ALL of these costs are added to the price of the car your teen wants, then refigure what it will cost him/her in terms of wages and hours worked, reminding him/her that taxes are taken out of wages as well. He/She may be very surprised to learn just how expensive it is to have a car, and that is exactly what you want to teach him/her.