Teens & Money
Want to make your young teen understand the cost of operating a car before getting a driver’s license? Here’s an activity that will get action without a lot of effort on your part: tracking family car expenses.
Set a mandatory requirement that your teen keep a record of family car expenses for several months or even one year before they get their driver’s permit.
To do this your teen will record and calculate costs taking into account gasoline, maintenance, loan payments, and insurance. The numbers can be tracked using a computer spreadsheet or paper log.
At the end of this project your teen will have prepared and presented several monthly expense summaries and one final summary that shows the actual cost per mile for family vehicles.
Start by having your teen sign an agreement something like this.
I ____________ will keep a Car Expense Log for each family vehicle for _____ months. I will provide a report to my parents each month. At the end of the final month I will present a report showing the cost per mile for each vehicle including account, maintenance, loan payments, and insurance.
Signed ____________________ Parents _________________________ Date ______________
Sound impossible? Not if you continue to reinforce that this is a non-negotiable requirement for getting a driver’s permit. You can sweeten the deal if you like by paying a fee for each report as a way to supplement your teen’s allowance.
This is a designed to be a self-directed project. If he does not gather the information and present the reports then you as a parent have the authority to delay driver’s permit until the project is completed.
Your teen is responsible for this project but will need the gas purchase receipts. One way to gather them is to keep an envelope or small clipboard in the car. Amounts for maintenance, insurance and payments can be provided from your statements.
Why this is a good learning experience for your teen.
- Uses real numbers that are relevant to a teen’s life
- Develops responsibility for keeping records
- Requires calculating costs based on various criteria
- Enhances what a teen may learn in school about car loans and insurance
- Creates a mental picture of what it costs to operate a car
Here’s a sample spreadsheet and information about the entries.
Start with the odometer reading on day one. Whoever fills the car writes the odometer number on the receipt. If this is not convenient your teen can get the reading from the car on day one and at the end of each month. The numbers will be less precise but the calculations are still educational.
Calculation: Miles traveled
- Subtract current reading from previous number
Record numbers from receipt
- Gallons purchased
- Cost per gallon
- Total cost of purchase
Calculate: Cost per mile
- Divide total cost of purchase by miles traveled
Receipts for Maintenance
- Keeping track of these during each month helps show how car expenses can skew a monthly budget and will need to be accounted for in the final cost per mile calculations.
Statements for car payments and insurance.
- These are generally regular payments that can be added to the calculations at the end of the year.
Additional information for your teen to know: Insurance increases for teen drivers
Make sure your teen knows how much the insurance bill for the family is increasing when they get their driver’s license. Call your insurance company to find out what happens when you add teen drivers to your policy.
Not only does the insurance increase with a teen driver but there can be another catch. We had three vehicles with two adult drivers when we added our first teen. Surprise! She had to be listed as the primary driver of one of the vehicles, triggering another increase.
Note that in this example the totals are shown both with and without payments to show how car payments change the cost per mile. At some point there may need to be a cost/benefit analysis when the maintenance on a paid-up vehicle approaches that of monthly car payments.
Knowing car operating expenses is a real-life example that teens can relate to. The cost per mile is the most instructive. Your kids can see how much an extra trip to the mall costs. Eventually, when you teen owns a car he or she will not be as surprised when the numbers start to add up.
We used our car expense information in a negotiation with our daughter who wanted to take a part-time job at a mall 20 miles away. We’d agreed that she could drive our car if she reimbursed us for the cost per mile. She quickly realized that after she paid the commuting costs she could not earn her share of her college expenses and made the decision to find a job in town. Lesson learned.
Even before your teens are old enough to drive, they should know that every mile has a cost. Learning how much it really costs to own and maintain an automobile is a good lesson that you can provide in your home at no cost to you.
Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school and continuing through high school.
Ever wonder why teens are so carefree with money? It’s because children think about money in a different context than adults. This is partly because kids are kids and partly because parents are haven’t discovered the power of using a no-cash allowance to teach kids Allowances are a powerful money management skills.
In our society, kids are not required to earn money; someone gives it to them. Kids don’t have to pay bills; parents take care of them. To kids, money is a treat, sometimes received regularly, sometimes not.
Most adults have to earn their money so an adult looks at money knowing that it usually has to pay for choices made in the past, as in, “Can I make the full mortgage payment this month and buy groceries?”
On the other hand, kids get money from parents and relatives so, to a kid, their money is for the future as in, “What will I buy at the mall today?
There’s nothing horribly wrong with this picture. As parents, we enjoy seeing our children have fun and nothing says “fun” like having money to spend. The reality is that kids and adults view money differently because they get it from different sources and have different motivations for how they spend it.
However, when we casually dole out money to our kids, while at the same time taking care of their financial necessities, we enable them to develop freewheeling attitudes about money. In doing so, we are not preparing them for the reality they will face as adults, where they have to work and make decisions about paying their bills before they can go the mall to spend for fun.
Let’s consider getting a driver’s license. We can agree that getting behind the steering wheel is the fun activity that our kids relate with driving. However, as parents we know our kids need to learn the rules and practice the skills of driving. If not, we fear they could have an accident.
We also unconsciously know that through practice making good driving decisions our kids will begin to understand and appreciate the responsibility of having a driver’s license.
Learning to manage money also requires practice to develop skills. Without practice using money for more than just fun spending our children will not change their attitudes about money before they become adults.
Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school through high school