Why Your Teenager Shouldn’t Have A New Car

If it is your idea, as a parent, to help your teenagers set realistic financial goals and be financially successful in life, one of the worst decisions you can make is to buy them a new automobile.

When my daughter was ready to drive, I bought my mother’s 2008 Hyundai Tucson. Funny thing is that it gets my daughter to school and her jobs just as well as any other vehicle. We focus more on teaching her how good the inside of her bank account looks than how the outside of her car looks. She is already well on her way to financial independence–and not making this mistake will help your children get there quicker as well.

Specifically, here’s why a new car is such a colossal mistake:
The laws of depreciation vs. appreciation. The fact is that cars are guaranteed to depreciate. And the financial lesson you want to teach your children is to buy assets that can appreciate over time, not those that will undoubtedly go down in value. If you explained that a $40,000 car will only be worth $25,000 in two years, do you think your child would rather drive a $20,000 car and invest the other $20,000?

Teens don’t see the cost of ongoing maintenance. It’s likely that if you paid for the new car, you are also picking up the tab for the insurance and maintenance (maybe even the gas). If that’s the case, when your child has to ultimately take over these expenses they won’t have any idea of how to budget for them. And what will happen if gas goes back up to $4 a gallon? But if they had to pay for those costs with, say, the $2,500 they earned from a summer job, they may have rethought the shiny new car with the bigger price tag–and higher accompanying expenses.

You give them unrealistic growth expectations. If your child is driving a brand new Mercedes, BMW or Range Rover, what will be the growth trajectory for getting a “better” car? It is important to instill in them that some of these things can be attained by hard work when they are earned, but being gifted expensive possessions such as a fancy car is not something that is likely to happen in the future.

Written by:
Ted Jenkin

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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express.  He is the co-CEO of oXYGen Financial.  You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin

About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves

Hey!

My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation. 

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