Is Your Teen Ready to Drive Their Financial Future?

by ECCU

Girl smiling as she receives car keys

June 6, 2018

Our series on banking for the whole family continues with a look at the needs of high school students.

By this age, they probably understand the basic concepts of personal finance and have savings and checking accounts established in their names. (If not, it’s never too late to teach them these lessons. Our previous posts, such as “What Kids Should Know about Money at Every Age,” are primers you can share with them.)

One of the best ways to motivate high school students to engage in financial education is to give them an incentive. And what does every coming-of-age student want? The freedom to drive!

Before you hand over the keys, however, it’s important that teens are responsible and informed consumers. AOL News offers a range of tips to help parents teach their high school students money-management skills. Among our favorites:

  • Put them on a monthly budget
  • Teach them the art of thrift
  • Talk about college financing
  • Warn them about identity theft

 

And when the urge to drive hits, it’s time to discuss how teens can get their first car. For most families, there are three options, as Dave Ramsey summarizes:

  1. Buy them a car
  2. Let them pay for the car on their own
  3. Do a combination

 

As Teens Guide to Money explores, “As a teen, it’s more difficult to buy a car, since we don’t have an established credit history and will have difficulty finding someone to lend us the money without a credit history.”

As a rule, Teens Guide to Money recommends car buyers – whether parents or teens – put down at least 20 percent. “Remember, the purchase of the car is only the beginning of your expense items,” the guide site warns.            

Consumer Reports reinforces this advice: “Establishing a reasonable budget is critical. The money you have available for a down payment and potential for making monthly installments on a loan will determine your car choices.”

And should your teen go for a new car or buy a preowned model? There are pros and cons to both options. Consumer Reports points out that new vehicles are presumed to be consistent performers but the best way to save is to buy used. Although, remember to build the cost of initial maintenance into your budget (tires, brakes) to get your teen off to a safe start. 

Whether you select a new or used vehicle, a sporty coupe with plenty of power or an energy-efficient hybrid, one thing is certain: helping teens navigate one of their first big consumer purchases in life is a powerful way to reinforce and instill financial literacy lessons.

And to help get your teen on the road to purchasing that first car, ECCU offers Start Young Saving and Spending Accounts for teens up to age 17, and kids all the way down to toddlers. These accounts provide full-featured digital banking, complete with parental controls, limits and monitoring. Learn more here.

Category: Common Cents