Put your young teen to work tracking car expenses

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.

  1. Uses real numbers that are relevant to a teen’s life
  2. Develops responsibility for keeping records
  3. Requires calculating costs based on various criteria
  4. Enhances what a teen may learn in school about car loans and insurance
  5. Creates a mental picture of what it costs to operate a car

Here’s a sample spreadsheet and information about the entries.

Teen tracking car expenses for family vehicles
Teen tracking car expenses for family vehicles

Odometer
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.

Annual expenses for family vehicles
Annual expenses for family vehicles

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.

Summing Up
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.

You don’t have to be an expert to have the money talk with your kids

The never-ending parent to-do list includes talk with your kids about money. You know it’s important yet money talk sinks like an anchor because you don’t what to say. Or don’t believe you have time. Or don’t think you know enough.

Relax. It’s easier to talk with your kids about money than you think. Your goal is a casual two-way conversation where you and your kids comment, ask questions and share experiences and information.

Keep in mind that talking with your kids is a conversation; talking to your kids is a lecture. When you have conversations with your kids you develop a valuable long-term learning situation for your family.

Money talks with your kids give you the opportunity for a better understanding of what your kids know about money and what they need to learn. As a family you learn how to talk about a topic that many families avoid.

You and your kids will learn some new things together because money keeps changing over time. Look back in your own life. As an adult you are using forms of money and payment options that were unheard of when your grandparents started a family. In this aspect money will continue to change.

What will not change is the role of money in our lives. The ability to control one’s money provides the power to make choices. As in life in general, power without responsibility can be dangerous. Yet responsibility without control is unrewarding and frustrating.

Learning about how to manage money is more than understanding dollars and cents. Having money and making good choices are the foundation for financial stability. To develop this skill children need to know how to manage money as well as why.

Knowing how to manage money is a process, a skill that requires practice. For example, the process explained in my book The No-Cash Allowance provides a reliable, consistent process for children to use to keep track of their money. Think of the how as the math and numbers part of money management.

Knowing why to make money choices is be based on principles, values, and personal guidelines. While your children will learn about the values that are important to you, know that they may develop their own as they mature. Having the money talk will give your children the opportunity to developing their own value system.

In any family conversation about money it is important to keep the how and why separate. This helps parents focus the message and makes the message clearer for their children.

For example, parents often want to encourage their children to save money. Saving money is a value decision, a guideline for how to use money. Saving money, however, does not help a child know how to keep track of their money. Both are important but one is a process and the other is a value decision.

As you start money talks in your family there are four basic techniques to help you keep the conversation from turning into a boring lecture that kids tune out. For an example, let’s start a conversation about how a family uses money.

Start with a general statement. “As a family our money has to be used for many things. What does our family spend money on?” Listen carefully to what your kids include and what they leave out.

Add some educational information. Whether or not your kids mentioned housing and food as expenses, you can let them know that your family is like most others. “Did you know that most families spend similar amounts of money on housing and food? As parents we have a responsibility to pay for these things.”

U.S. consumers spend the biggest percentage of their money on housing 27%, followed by transportation 12% and food 10%. To view the infographic showing the complete spending breakdown click hereBureau of Economic Analysis

Expand the conversation. Pose a question or comment that makes the discussion relevant to your child. “When you get money, how do you decide what to spend it on?” You’ll probably find that your kids are quite average.

Parents say most of their kids’ allowance is quickly spent on outings with friends or toys. American Institute of CPAs

Summarize. Wrap up the conversations by saying something like, “Parents have to spend a lot of their money on taking care of their family. We have to make responsible choices with our money. When you get older how you will have to make choices so you can pay your bills just like we do.”

From this example you can see that you don’t need to be an expert to have a money talk with your kids. Money talks can short, during a car trip or at a meal. The very act of starting a dialogue about money will set the tone for helping your kids understand and learn from the people they look to for financial information.

A 2013 survey showed that 63% of high school seniors who discuss personal finance and money management very frequently feel “very confident” in their ability to manage their personal finances vs. 24% of those who do not discuss it frequently. High School Seniors’ Financial Knowledge and Outlook: A Discover Pathway to Financial Survey.

As your family creates a comfort level with money talk you all benefit from the experience. Future posts about money talk will address other topics about money and money management.

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 about money from pre-school through high school.