Should I Buy My Kid Their First Car?
Buying a Car vs. Down Payment Money
Buying a car is one of the most valuable experiences a kid can have. From learning to save larger sums of money to discovering the ongoing costs of maintenance, there are many lessons for a young person to learn. Your child’s first experience with car ownership will likely affect many of their future financial decisions. This can be a great opportunity to lay the foundations of a debt-free future by developing smart decision making skills early on.
The Pros and Cons of Buying Outright
One option parents have is to go ahead and buy a car for their children. This approach does have a couple of advantages, but it fails to achieve the overall goal of teaching financial responsibility.
By paying for the car yourself, you will have full control over the type of car and the age of the vehicle, as well as the condition it’s in and all other details. As the car’s true owner, you could take it away if your kid starts doing poorly in school or refuses to get a job to pay for the car’s upkeep.
As a parent you already have a lot of control over these areas. Helping your child learn how to make these decisions on their own can give them the confidence and experience they will need later in life. Cars are expensive, both to buy and to maintain.
Making such a large purchase may be impossible given your current debt situation. At the very least it can strain the family budget and lead to worsening debt.
But even if you are able to pay for the car you will be depriving your child of many of the financial lessons that come with car ownership.
Building a Car Fund
Of course you want to do what you can for your children, and you will still be able to contribute some cash to get them started if you are able to do so. There are a few ways to approach this. You could make the first deposit to open a new bank account for them. Many jobs today already require a bank account for receiving direct deposits, so this might be a good idea.
If you have a checking account, you could write a check with the condition that you will sign and date it when the kid earns a matching amount. This will give them something positive to look forward to and work towards.
Requiring your child to build their own car fund and giving them a down payment to get started will help them learn valuable financial skills. They will learn how to budget the funds they have and how important it is to track spending habits. They will begin to develop positive strategies early on.
Saving the money to buy a car will give them something to be proud of. It will also teach them the value of money and spending responsibly when purchases need to be made.
If your family is struggling with debt, building a car fund is a sensible approach for a teen looking to get on the road. No matter which way you choose to go, the experience is something your child will remember forever.
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