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| The Basics | Should you buy your kid a car?
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In some communities, it's considered a rite of passage for teens. But the decision involves more than model, cost and safety. It can shape a child's lifelong attitudes about money and entitlement.
By Liz Pulliam Weston
Attorney David Tilles hasnt made up his mind, but hes leaning toward buying his girls a car.
His daughter and stepdaughter, both 15-1/2, need daily rides to and from their Los Angeles parochial school. Then theres soccer practice, and games, and all the other events that come with two fairly socially active teenagers.
Youre like a chauffeur, said Tilles, who has ruled out buying anything new or luxurious but is thinking about a later-model Jetta. Maybe if they had a car . . . they could schlep around their younger brother sometimes.
For many parents, the idea of buying a car for a kid is a non-starter: They either cant afford it or are dead set against indulging their children this way. Others long for the convenience of having another set of wheels in the family, but struggle with whether, and how much, they should help with this major purchase:- If the parents contribute too little, the kids could wind up in an unreliable junker -- or working too hard to support a car rather than attending to their studies.
- If the parents contribute too much, the kids could acquire an unhealthy sense of entitlement and be unprepared for how much things cost in the real world.
A gift with a message about money
Theres no one right answer -- what you do and how you do it will depend on your financial situation and your values. But parents who are considering buying a car are right to be concerned about the messages theyre sending and the potential effect on their children, said psychiatrist Gary Buffone.
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Children who have cars handed to them often never learn the value of money, said Buffone, author of Choking on the Silver Spoon: Keeping Your Kids Healthy, Wealthy and Wise in a Land of Plenty. They turn into financial disasters.
Buffone has watched some of his affluent clients buy their offspring luxury cars -- only to buy a replacement when the irresponsible young drivers totaled the gift a few months later.
Sometimes it takes two or three cars for the parents to catch on, Buffone said.
Buffone set up a dollar-for-dollar matching fund for his own two daughters, and then cosigned the first car loan for each. Now grown, the daughters have taken similar approaches with their own children.
If youre going to give a car, it should be tied to some effort on the part of the child, Buffone said. You dont want them (to get the message that) other people are responsible for giving them what they want.
Parents who dont want their children to hold jobs during the school year could at least insist that the cars use be contingent on the children keeping up good grades, he said.
Should they get the Lexus?
Money manager Randy Shoker of Oxford, Ohio, thinks parents also should carefully consider the type of car they want their children to drive.
Shoker doesnt necessarily want his four children to drive a rolling death trap like his first -- a 1968 Mustang with no seat belts and the kind of straight steering column that causes massive chest injuries in a crash.
But he also doesnt want to give the kids his 9-year-old Lexus when he buys his next car, despite impassioned entreaties from his two oldest, a son, 15, and a daughter, 14. Even though it might be the cheapest solution -- the residual value of the Lexus is pretty low, and he wouldnt have to buy comprehensive or collision coverage -- he is determined not to give them a luxury car.
I told them that they are not going to drive more car than they can reasonably afford with their first job, Shoker said. I see too many clients children refuse to take a cut in their standard of living when they get out of school, and they are forever trying to live beyond their means.
Shoker recognizes, though, that peer pressure isnt limited to teenagers. He sees many parents determined to show off despite the potential cost to their children.
Theres a little bit of parental ego tied up in their childrens cars, he said.
Parents' own peer pressure
In really affluent neighborhoods -- the kind where you can tell the students parking lot from the teachers because the former is where all the luxury cars are parked -- both kinds of peer pressure can be intense, said Eileen Gallo, co-author of Silver Spoon Kids: How Successful Parents Raise Responsible Children.
Parents need to recognize that, Gallo said, and make their own values clear.
When (our kids) said, Justins dad is leasing him a Lexus, we said, 'Isnt that nice for Justin? said Gallo, mother of two and stepmother of a third. "'But in this family, this is the way we do it.
If youre considering buying your teen a car, here are some things to think about:
Get real about what you can afford. If youre deeply in debt, not saving enough for retirement or way behind on college savings, skip the car. Keeping your priorities straight will ultimately set the best example for your children.
Consider waiting. You might want to give your new driver a few months or more to build up driving skills before deciding whether to hand over a car. That means putting your own vehicle at more risk, of course, but youll have a better sense of his abilities and how responsible he would be with his own wheels.
Involve your child in the process. You -- and she -- may get a huge thrill out of a surprise purchase, with you casually tossing her the keys and her discovering the car waiting in the driveway with a bow on top.
But if you go for that not-so-cheap thrill, youre missing some valuable teaching opportunities, Buffone said. Taking your child to a couple of dealerships and letting her talk to the salespeople can provide lessons in comparison shopping, haggling and sales techniques. Discussing loans and finance arrangements can help her learn to evaluate lending costs. If all you teach her is that its better to pay a loan off quickly, rather than make smaller payments over a longer period, shell be eons ahead of most of her peers in money management.
Make your child at least partly responsible for the costs. There will be many, besides the cost of the car: insurance, gas, maintenance, repairs, perhaps a speeding ticket or two. Figure out in advance which costs your child should cover, and make those expectations clear in advance.
(If you decide to cosign a loan, write the checks yourself and get reimbursed by your child. One late payment can lead to repossession and wreak havoc on your credit rating.)
Think about safety. Those big old junkers may be cheap to insure, but they probably lack some basic safety features that could keep your child alive in the greater-than-average chance hell be involved in a crash. Anti-lock brake systems can help an inexperienced driver avoid an out-of-control skid, and airbags can turn a potentially fatal accident into a survivable one.
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
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