Teens and Cars

Cars are a big deal for teens.  I have 4 sons.  Nothing beats the thrill of driving by a gaggle of girls after school and honking your horn to give a friendly wave.  We have some pretty stiff rules for all of our boys when it comes to the coming-of-age tradition of getting their driver's license and their first car.

Here is a snapshot of our house rules for teens and cars:

When Obtaining a license:

                                                      1.  Have a job

                                                      2.  Have a $1000 emergency fund
                                                      3.  Pay for one year of insurance

 When Purchasing a car:

                                                      1.  We cover up to $2000

                                                      2.  The car goes in their name alone 
                                                      3.  The teen pays for insurance, repairs, 
                                                           and upkeep

 LET'S TALK ABOUT EACH INDIVIDUAL POINT: 

At age 16 we consider much of our financial obligation to our children to be completed.  We still pay for food, shelter, and medical expenses.  But, at this age we begin to transfer monetary responsibility to them.

 PART TIME JOB!

Before taking their driving test, they must have a part-time job.  There is no sense getting a license if you can't afford car insurance.  Our oldest took a job a little more than a mile from our home.  In good weather, he hoofed it back and forth to work.  If the weather was inclement, we took him.  We were willing to provide him transportation until he got his license, but he preferred to listen to music and think while he walked twenty minutes to and from work.  Our second son got a job about 3 miles from home.  We took him to and from his part-time job until he had saved an emergency fund and car insurance money.  Although it did make for a pretty busy life, especially when both boys started working, it was worth it to us to offer them transportation while they got up on their financial feet.

EMERGENCY FUND!

 This brings us to my second point.  Our children are required to have a $1000 emergency fund before getting their license.  We want the habit of having money set aside for a "rainy day" to be thoroughly ingrained in them before they leave our home.  Additionally, I can't imagine a time in their life when they will be able to more quickly and easily save up that $1000 than when they are still living under my roof and not paying room and board. 

CAR INSURANCE!

They must have enough money to pay for one year of insurance up front.  If you pay monthly, the insurance company tacks on a "convenience fee".  We try avoid all fees and teach our children to do the same.  My grown sons use Dave Ramsey's free budgeting app, Everydollar, to track their monthly expenses and save enough money monthly to cover their insurance bill in full when it arrives once a year.

When one of our sons gets his license, we charge him the difference between our current insurance policy and the amount it goes up when we add their name to the policy.  One small note:  If the child gets his or her license in the middle of our insurance cycle, then their portion of the insurance is prorated.  For instance, our second son got his license in May.  Our yearly insurance bill is due in August.  So, the insurance prorated the amount.  He paid us for his portion of the insurance for May through July.  Then, in August, he was responsible for his portion of the entire yearly bill when it arrived in August.

We do not provide a separate car for our sons to use.  We have two cars.  We don't need any more.  If they want exclusive use of a vehicle, then they can purchase one.

MOM AND DAD'S INCENTIVE PROGRAMS 

 But, wait!  There's more!  

FREE RIDE

As extra incentive to save money, we agreed to get them to and from work, free of charge, from age 16 until they got their license.  Our sons both worked an average of 15-20 hours a week during high school.  It took them 4 - 6 months to save up their $1000 emergency fund and enough for one year of car insurance.  Additionally, in our state a teen under the age of 18 must complete 50 hours of practice driving before obtaining a license.   They purchased cars at age 19 and 18, respectively. 

FREE MONEY

Just as there are requirements for getting a drivers license, there are requirements for getting a car.  We like to call our special incentive program the:  "Mom and Dad 401k Car Fund".  We modeled it after Dave Ramsey's car plan for his kids.  Just like some employers match a percentage of your 401K contributions, we match what they save toward a car - up to a certain amount.  We match the first $1000 that they save. Then, we match it again for the second $1000. Then, we stop.  Basically, if they find a set of wheels for $4000, then we have paid for half.  If they want to spend more money, then they are more than welcome to ante up with more of their own dough.  Our first son found a car for under $4000.  Our second son spent more.  It goes without saying that all vehicles are bought with cash.  No loans.

 

The title of the car went in their name and their name alone. They were responsible for insurance, gas, maintenance, licensing, etc.  We did find a local company who would bundle their insurance with ours, even though their vehicles were not in our name.  That saved them a little money every year.  Good student discounts saved them even more!  When they are paying their own bills, believe me, they will work hard for that "A" or "B" in order to save money on their insurance!

FREE GAS!

We did institute one more rule.  This is a fun one!   If we borrow their wheels (even to run to the store) we fill the gas tank for them.  They tend to offer their car to us for errands whenever their indicator dips below one-half a tank. Okay, I'm really a softie at heart.  We don't help them much monetarily and our cars are generally parked in the garage, while theirs are on the driveway.  So, it does make it convenient to grab their keys to run a quick errand, rather than move cars around.  But, having said that, it is fun to be a blessing to them when they least expect it.

Remember,

Do all to the glory of God,

Hope

My Teen Took Over Our Budget!

  

Six years ago we allowed our teen to take over our family budget! Today, I want to share with you, my readers, how this experiment worked out for us. Did I raise fiscally responsible young adults? Do they understand that "cash is king"? Do they quote Dave Ramsey to their friends? Read on! You'll learn why our children are not allowed to graduate from high school until they have handled our family finances for six months and what they learned from the whole experience.  At the end I'll tell you how this impacted the lives of our oldest children. 

My husband and I have been using (and sticking to) a written budget for our entire married life - 30 years! We have experienced the peace that comes from living debt-free — including our home — since 1998! In 2012 we decided it was time to make finances and budgeting “real” for our oldest son. He was 16 at the time. We put him in charge of our family finances for six months! That’s right. He took it over “lock, stock, and barrel and I think it was an experience that he will never forget. 

If you’d like to get your teens more involved and aware of real-life finances, here are a few tips that helped us.

Give Them Credit

I admit, this has a dual meaning. We homeschool. So, it was natural for us to offer our son high school credit for his foray into the world of finances. But, I also mean, that we need to give our children credit for being mature enough to learn real world, life-long lessons by taking an in-depth look at our family’s money.

I was actually afraid that the whole experience would take away some of my son’s innocence. He would learn just how hard it can be to “make it” on one income. I wanted to be sure that he retained his feeling of security. We don’t want our children to worry that “Mom and Dad won’t have enough money”.  

Give Them Advice

Within the first week he was looking at me wide-eyed. "Mom, it looks to me like every penny is accounted for in this budget. Is there any money left over at the end of the month?" Three weeks later he was emoting about the grocery budget, "Mom, is this correct?! We have just $35 left for groceries??!!" I answered his initial inquiry. "No, there is generally no extra money."  His second question resulted in him being directed to the row of cookbooks in the basement, where he was instructed to match up recipes with ingredients already available in the house.  

To my surprise, rather than becoming overly concerned about money (or the lack thereof), quite the opposite occurred. As the weeks went by he began to give praise to God each time he saw a need being met. He became aware of how much money it took to raise a houseful of boys. We had many conversations about how to save money on every single budget category. He had a blast! He clipped coupons, scoured the ads, and found bargains. He planned the grocery shopping and the menus. He totaled up those numbers and adopted my victory shout. "Yes!!!!! Mom!  We made it through the month and there is money to spare!" 

Give Them Tools

We began this process by enrolling our son in a six-week money management course, which we attended with him. This gave him a lot of Biblically-based knowledge about money principles in a logical and sequential manner.  

We then set out to show him practical examples of how to make your money work for you.  On the Crown.org website, I showed our son that if  he saved $450 a month, at 5% interest annually, he could purchase a $120,000 home for cash at the end of 15 years. If you multiply $450 by 15 years you get $81,000. That's right!  Your total investment: just $81,000.  The rest of that $120,000 is earned interest! 

Then, we used the tools to see how much interest you would pay on a $120,000 mortgage.  The interest on a 15-year, $120, 000 mortgage at 5 percent is about $50,000. Add the principle and you would pay about $170,00 for that same home. For a 30 year mortgage, the interest is nearly $112,000. (or $232,000 total loan repayment!)  

Boom! He could immediately see that there is a HUGE difference between paying cash for purchases and taking out a loan! I LOVE on-line calculators to show kids real examples about money. Let them put in their own savings goals and amounts. They’ll begin to understand the importance of delayed gratification and long-term goals. Here's the tool we used to calculate this monetary magic.  http://www.crown.org/FindHelp/Personal/Calculators/savingsgoal.aspx. 

Give Them the Reins

Let them do it! After the money management class, I opened up our finance books to our son. When a bill came in,  he told me how to fill in the check (or make the transaction on-line) and entered the amount in the proper part of our household ledger.

He entered all of our expenses into the ledger, kept track of each category, made a spread sheet at the end of each month showing what we spent in each category and what we averaged thus far for the year. He also made recommendations on what changes we needed to make in each category – if any.    

When we began this project, I knew I wanted our son to take on our finances for at least six months so he could see seasonal fluctuations. I also was fairly confident that something unexpected would happen within that time frame — so he would get to see the emergency fund at work. It did! He accidentally hit the garage door while I was teaching him to park in the driveway.  😁 This would be why my husband has taught the lad to drive and not me. 

Give Them a Goal

Our son’s final task was to look at the yearly totals in each category and set up the family budget for the following year. A sense of completion is important and the end of the year always seems like a time to take a deep breath and say “thank you” to God for helping us and blessing us. 

For his final exam, he produced our “end-of-the-year log”. This document details our net worth, savings for the year, what percentage of our income went to each category, a list of our current short, medium, and long-term goals, and the 2013 Ware Family budget!   

Whew! It was a lot of work!  He received an "A"  in “Consumer Economics”. He learned how to budget and make short, medium, and long-term goals. He discovered the importance of an emergency fund. He is genuinely grateful any time we are able to give him something extra — not a needed item — but just something to bless him because he is our son and we love him.  
                                                 Money has become a reality to him!

Did our money managing experiment work?  

Our oldest son has won several scholarships, has a nearly perfect 4.0 GPA, and is paying his own way through college.  He was awarded a full tuition scholarship to a fantastic Christian university!  He is a major money saver, lives on a budget, and plans for future goals.  

Our second son also had his chance to manage the family budget. This tech-wizard, wonderboy computerized the entire system for me!  I love it! He had a blast investigating all the computerized budgeting programs and picking the best of the best. We now use https://www.everydollar.com/ , a FREE monthly budgeting app from Dave Ramsey.  My son attended Financial Peace University with us and is known to quote Dave Ramsey to all his friends. Since graduation from high school, he has worked full-time and is highly sought after for his outstanding work ethic and amazing troubleshooting abilities. When credit card offers arrive in the mail he laughs, rips them up, and goes back to plotting his debt-free future. 

Go to http://www.daveramsey.com/fpu/home/ictid/classpage/ for a list of classes near you. For Biblically-based money advice, check out http://www.crown.org/  or http://www.daveramsey.com/home/.   You’ll find a lot of wonderful budgeting advice there along with charts, articles, and interactive tools.  

Your Turn!

Over the years, I've encountered a variety of responses to our experiment in teaching our children how to handle money. Some have said that they really don't want their children to know about the family finances for fear that they will broadcast this knowledge to all of their friends. Admittedly, this is something that I really didn't think about when we had our sons take over our budget. But, then again, being a prolific writer and public speaker, who openly shares about money and budgeting sort of meant that most people already knew the general state of our bank account. So, have you ever allowed your children to see your finances? Would you allow them to take over your budget? Why or why not? I'd truly love to know what you think about this concept. Leave your thoughts in the comments section. 

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Do all to the glory of God, 

Hope

The Journey to Debt Free College

(This post was originally published in 2014. Since then, two of my sons have graduated from high school. I added a postscript at the end of this article, updating you on their lives, careers, and whether they were able to attend college debt free.) 



Our oldest is a senior and plans to attend college with no debt.  Here is what we have learned, thus far, in our journey to higher education.  As we get closer, I’ll have to report on our progress. 

1)  Be VERY clear with your student at an early age as to what, if any, help he/she can expect from you and your spouse.  Whether you plan to give them $2000 (or $200) upon graduation from high school, let them know well ahead of time.  If you expect them to foot the entire cost of a higher education, this is fine, as long as they know it well in advance.  It saves on unmet expectations or hurt feelings if you are very open from the beginning.  

 2)  Our community college will be a GREAT help in cutting costs for the first two years.  He has easily saved enough to fund this through a part-time summer job.  Additionally, he'll save money during the first two years of his college experience by living at home and continuing to work that part-time job.   Every penny counts toward the ultimate goal of transferring to a 4 year university.  

3)  Fill out FAFSA in January.  Even if you need to estimate your income, fill out your initial papers on-line as close to January 1^st as you can.  This “holds” your place in line and puts your “file date” as the date you initiated the file for that year.  So, if you begin the paperwork on January 1^st, and you amend your income amount on March 1^st, your “file date” is still January 1^st.  Since some funds are given out on a “first come, first served basis”, you have obtained and maintained your “early file” place in line.  (NOTE - You can now fill out FAFSA as early at October 1st.  It will use your taxes of the previous year for calculation.  If your financial status has changed greatly, finish filling out FAFSA and then call the financial aid office at the colleges which your student is interested in attending.) 

 4)  Research EARLY!  Go to college fairs with your student as early at their freshman or sophomore year.  Reps love to see eager faces.  Find out EXACTLY what those colleges want to see on your student's transcript.  Most 2 year colleges sponsor a bi-annual “college fair” night.  If your child is interested in a Christian college, check http://myblueprintstory.com/ to find a free Christian college fair near you. 

 5)  Ask questions!!  Answers are free!  We discovered that a 4 year college, which is about 30 minutes from our home, has a GREAT working relationship with our community 2 year college.  There is a rep. dedicated to helping community college students transition to their university.  Additionally, most colleges spell out very specifically what financial incentives they will give transfer students with high GPAs. 

6)  Watch those ACT/SAT scores.  If your child is truly interested in attending a 4 year university as a freshman, it is TRUE that they will be offered a LOT more financial aid as at incoming freshman, than they will be as a transfer student.  So, talk to reps early and often.  Ask specific questions about their scholarship levels.  Sometimes the monetary difference between an ACT score of 25 and 27 can amount to several thousand dollars in honors scholarship money at that particular university.  If your student needs an ACT increase of 1-2 points, then have them take the test again.  They can take the ACT up to 12 times, although statistically scores don’t increase significantly after the third try.

7)  Visit universities.  We are just beginning this part.  This is the fun part.  They like you.  They want you.  They serve you a free lunch.  Seriously, don’t go over the summer.  Go when class is in session.  This way you can visit with students and ask about their experience.  You can see if traffic is crazy or if the class sizes seem abnormally large.  If your student is seriously interested, plan to visit more than once.  Any college should be open to hosting your student overnight and letting them audit classes the next day, which are associated with their chosen field of study.   Finally, bear in mind that this more money than buying a house folks!  Don’t be afraid to ask all of your questions, and have them answered adequately, before you make a commitment.  Be sure you understand ALL the costs before you "sign on the dotted line."  People who have never had to live on a limited income forget to add those "$50" parking passes, and "$100 one-time enrollment fees".  But, if you count nickels and dimes (like we do) then you want to know ALL the costs.  

8)  Apply for scholarships EARLY!  There are a lot of scholarship opportunities available for younger students.  Most involve writing essays.  So, be certain your student gets a GOOD background in what constitutes "good writing."  Even if your student does not win, an honorable mention in a nationwide contest looks REALLY good on their transcript. http://www.fastweb.com/ is the best place we have found to scout out REAL scholarships.  Yep, there are a lot of places on-line which will charge you money for research that you can do yourself.  You need to sign up for an account.  But, really, we have not received a lot of nuisance e-mails or phone calls from signing up with Fastweb’s free service.  To guard against this possibility, we DID set up a separate e-mail account dedicated to all college research. So, all the colleges have that one, special e-mail address.  You don't clutter up your own in-box then.  

9)  We put our son in charge of our family finances for six months when he was 15.  This was a HUGE help in him understanding money - how to save, spend, and manage it. 

What about you?  Are you on this journey?  Any additional tips you can share?  I’d love to hear from you.

Update: July 2019.  

Our oldest took as many classes as he could at our local two-year college, paying just a couple of thousand dollars out of pocket after scholarships.  He was offered a full-tuition scholarship at a 4 year Christian college to finish his undergraduate degree.  He worked full-time for 1 semester to earn money for room and board before transferring. He will graduate debt-free in May of 2020 with an undergrad in psychology. We have given him just $4000 toward his college education. 

Our 2nd son graduated from high school three years ago and chose to pursue his love of technology. He now has his dream job, working in IT for a Christian healthcare sharing company.)  

Remember, do all to the glory of God,

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Do all to the glory of God, 

Hope