Buying your first car how to earn that valuable set of car keys

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A CAR is often a teenager’s first big purchase in life and can also provide a great opportunity for parents to drive home some top gear financial lessons.

Simply handing over the keys to a new or second-hand set of wheels is not a good idea, financial planners say.

Having your child contribute at least some of their own savings towards a car will go a long way to teaching them about the value of money and saving, says AMP financial adviser Darren James.

Offering to dollar match what they can save, or even a percentage of what they can save, will make their savings goal seem more achievable, he says.

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Parents who dont have the financial firepower to help out can still give teenagers guidance about saving money from part-time work and setting up direct debits into a separate savings account, James says.

Amanda and David Carruthers helped daughter Chelsea, 16, buy her first car this year by offering to match every dollar she saved from her casual job with a dollar of their own.

We said to her from the word go that we would pay half, Amanda Carruthers says. The result was a $3000 Mitsubishi Lancer just before Chelseas 16th birthday.

Carruthers believes it is important for children to pay for at least part of their first car. It makes kids more responsible and take a little more pride in something they own when they know that they worked hard for it, she says.

Catapult Wealth director Tony Catt says a first car can deliver big life lessons including developing discipline to save and managing risk through insurance.

Some parents have made the kids pay board, but they ultimately put that board towards a car, he says.

It boils down to parents values and what are they trying to instil in their kids.

AMPs James says the first step for parent and child is to have a budget in mind and create a short list of potential vehicles.

Dont worry about what friends are doing for their kids just focus on practical choices for your childs needs and your familys budget.

SAVINGS DRIVE

1. Choose a car that will minimise ongoing costs.

2. Keep it simple small or mid-size sedans and hatchbacks from mainstream brands.

3. Consider who will pay for the cars running costs.

4. Examine insurance is it cheaper in the parents name with the childs name on the policy?

5. Buy used a teenager does not need a new car even if they want one.

Source: AMP