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Editor's note: This article originally ran on the personal finance blog Get Rich Slowly. It has been reprinted here with permission.
As far as I know, only one reader of Get Rich Slowly knows me personally. And last week, I was having lunch with my one-person fan club. (Actually, I am not sure she’s even a fan, but she did buy my lunch. Thanks, Lisa!)
“You really stirred up some controversy with one of your recent posts,” Lisa said, a forkful of salad in hand.
“You must mean the one about not paying for our kids’ college, right?” I said.
“Yes, that’s the one. You know, it really made me think.” Without telling me her opinion on the subject, she said, “What do parents really owe their kids? Financially speaking, of course.”
“I actually wanted to write a blog post on that.”
Though Lisa and I went on to talk about all the financial gifts parents can give their children (we decided that parents taking care of their own futures is a great gift to give their children), this post is about cars. Should parents pay for their children’s transportation costs or not?
A car with strings attached
When I turned 16, I immediately got my driver’s license. I arrived home with a plastic ticket to freedom burning a hole in my wallet. As I understood it, I would be allowed to drive the family car, so I was totally surprised when my mom said my birthday present was parked out behind the garage. Even though my heart rate increased, I tried not to show my excitement as I nonchalantly walked outside to find a small matchbox car “parked” in the snow. Ha ha. Very funny, Mom.
So, back to Plan A. Yes, I would be allowed to drive the family car. Yes, my parents would pay for the insurance and repairs, as long as said repairs were not from my own irresponsibility. I would pay for the gas, and I would have to forfeit the family car to my sister as soon as she turned 16. That gave me 22 months to save up for my own car.
“The hard part of this deal,” my dad said, “is that the car is the bargaining chip. When you get grounded, you’ll get grounded from the car. We will pick you up from work, and you’ll have to find your own ride to school or ride the school bus.”
Not that I ever experienced that part of the deal or anything. Ahem.
My husband had a different experience. He had to buy his own car right away and pay for everything. Like most things, we each think the way we were raised worked out best for us. And that always makes for interesting discussions.
The way I see it, we have three options:
1. Buy and give a car to our kids. Pay for everything.
- Pros — This gives you an opportunity to pick out the car. It should be something that is reliable, getting up in years, and something low on the cool-meter. I think a four-door sedan that their grandparents would drive is a good choice. Buying the car also allows your child to save money for something else.
- Cons — Is it necessary and the best use of the family budget? Would the child take care of it as well as if the child had had to pay for it him/herself? Does this help the child to manage money better or not?