Family Finance: Money lessons behind the wheel

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Molly Helm didn’t want to give her oldest son a brand-new car when he first started driving. So the Enid, Okla., mom spent $500 on a 1990 Chevrolet Suburban.

Molly Helm didn’t want to give her oldest son a brand-new car when he first started driving. So the Enid, Okla., mom spent $500 on a 1990 Chevrolet Suburban. "We called it ‘The Beast,’" she recalled. "And it suddenly became ‘The Beast of Burden,’ because the repairs and the gas cost so much." Sport utility vehicles, like the Suburban, are among the most expensive vehicles to operate. It wasn’t long before The Beast was donated to charity, and her son, Harrison Maud, 17, was driving Mom’s old Subaru. When kids are itching for a learner’s permit, parents have an opportunity to start a conversation about the financial impact of driving. Explaining that gas and repairs is just the start, and costs like insurance must also be considered, can be a way to open a teen’s eyes about the true cost of a set of wheels — an average $8,776 per year for a car driven 15,000 miles, according to AAA. Calculating a total can also provide an opportunity to work out who will pay for the various ongoing and one-time costs. Here’s a breakdown of the major expenses to consider: — Learning to drive Putting off getting a license can be a money saver, and statistics show that the number of teens learning to drive has fallen in the last few years with the downturn in the economy. But in communities like Enid, Okla., where there is little public transportation, a car can be a necessity for a teen who works and goes to school. A driver’s education course will help prepare a young driver while minimizing the damage to parental nerves. Molly Helm said her boys took a class offered by their school district. "That was the best $150 I spent," she said. "I really feel like it eases my mind, because they are better drivers." A private course will be more expensive, and the price will depend upon location. In major cities, courses run between $400 and $800, depending on the amount of time behind the wheel. — Buying a car "Our arrangement was that we would take care of the cost of the first vehicle," Helm said. Her younger son, David Helm, now 16, is driving a Ford Ranger pickup truck, bought used for about $5,000. Used cars are a good way to start off for several reasons: they’re often affordable without financing, and in general are less expensive to insure. Also new drivers are more likely to have accidents, and it may be easier to stomach a few dings on a second-hand car. Plus, many parents want their kids to wait for their first new car. "We felt they needed utilitarian vehicles," Helm said. "We don’t want the nicest car they ever have to be the one we got them when they started driving." — Insurance One of the biggest costs for parents is adding a teenager to their policy. For the Helm family, that meant an extra $4,000 per year. Boys are more expensive to insure because they have more accidents. Prices inch down as they get older and gain more experience, but Larry Thursby, vice president of auto product and pricing for Nationwide Insurance, said the biggest variable will be the state of residence. It’s also more expensive to insure a car specifically for a teen’s use. The cheaper option is adding the child to a family plan. There are several discount options for parents to look into. Completing driver’s education will usually lower the cost of insurance. Many insurance companies also offer discounts for teens with good grades — usually a "B” average or better. Ray Crisci, worldwide auto product manager for Chubb Insurance, said driver education can clip about 10 percent off total costs, while the good student discount can shave off up to 20 percent. Many companies will also offer a discount for insuring a college student who lives away from home. Crisci said most companies don’t require teens with a learner’s permit to be added to an insurance policy, but expect all licensed drivers to be listed. But some parents, like John O’Brien, a Chicago attorney, avoid the higher premiums by not adding their kids’ names to their policies. O’Brien argued that the insurance is for the car, not the driver. He said both of his kids, now grown, had accidents in their teens and his insurance covered the damage. "That’s called rate evasion, where you’re basically withholding information from your insurance company to avoid a premium," Crisci said. Although not listing a driver is legal, some companies may only pay the state minimum for liability after an accident, he warned. A parent who files a claim for an accident with an unlisted teen driver can also risk their insurance company declining to renew their policy when it expires, said Mike Barry, a spokesman for the Insurance Information Institute, an industry group. — Repairs When Molly Helm’s son Harrison hit a curb after skidding during an ice storm, his car suffered about $450 in damages. He had to pay for the repairs. "It takes a long time for someone who’s making $7.40 an hour to save up that kind of money," she said. The incident became a life lesson, because his parents also used it as way to emphasize the importance of having a savings account for emergencies, rather than using a credit card. There’s always another unexpected expense — a flat tire, a leak or drip or a strange noise that ends with a trip to the mechanic. These experiences also make it clear, she added, that the "great" job you get as a teenager doesn’t provide enough to live on. "With gas prices what they have been, it’s almost a whole week’s paycheck for them to fill up their gas tank." Copyright 2011 The Associated Press.

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