Author Topic: Do teens have what it takes to make right choices?  (Read 1709 times)

darkadams00

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Do teens have what it takes to make right choices?
« on: June 11, 2014, 10:43:01 PM »
My younger son is currently taking this summer to make his biggest financial decision thus far. He's a new HS grad heading to college this fall but planning to live at home--at least for the first couple years--to save money. His decision is about whether he should buy a car or use a bike/public transit combination. He has two nearby jobs this summer that he bikes to, but he's concerned about the much longer bike/transit combo that would be required for college. We discussed how much per hour he was implicitly earning by using the longer commute combo, and he understood that at the conceptual level. However, that hasn't been a big driver in his most recent discussions because he's not afraid of work. Working at a job is no worse to him than riding the bus.

The #1 issue that is pushing him to at least give the combo idea a try next year is this. He has enough cash in his savings account to buy the car from us that he intended to buy (if he buys) as well as pay for the first six months insurance, maintenance, fees, and gas. That would siphon off a huge chunk of his savings while he begins to pile up his funds again, which he seems to do well. His savings rate over the last year of part-time work has consistently been about 85% I think. With several thousand dollars on hand, he has begun to think of alternatives including one or more of the following: an inexpensive laptop (< $1K), a modest clothing upgrade (< $500), and continued savings for other college expenses. He just doesn't want to see that sum of money go out the door in basically one big transaction for something as "boring as a basic car" (his words). Given our discussions, if he were simply signing a 3-year loan for a used car, I think he would easily choose the car since the dollars in costs would be matched monthly against the dollars earned. The availability of this amount of cash on hand really has him considering all of the possibilities with much more scrutiny.

Do any of you with teens now or in the recent past think your teen(s) would have made any different choices given the optimal scenario--hard cash vs credit for a large purchase? I'm not so concerned about whether you feel a decision was right or wrong. I'm more interested in knowing whether many teens default to certain choices in key decisions simply because they've never had the cash on hand to include in the discussion.

GuitarStv

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Re: Do teens have what it takes to make right choices?
« Reply #1 on: June 12, 2014, 06:11:35 AM »
I never made a decision about that.  100% of the money I earned in highschool went into my university fund, so there was never an option to buy a car.  Try explaining the costs of university, the fact that getting into debt for post secondary education will cripple him as he starts his new career, and the fact that you're not going to support his freeloading ass when he gets out of school.

I may not have ever had much cash on hand before saving for university, but certainly I knew the value of a dollar.

NewStachian

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Re: Do teens have what it takes to make right choices?
« Reply #2 on: June 12, 2014, 06:33:17 AM »
The concept of cash flow isn't very well cemented for many teenagers. They think in terms of their assets, many times because jobs are part-time and unstable and expenses are mostly covered by parents. I can understand how a very financially savvy teen is worried about making a large purchase when it will consume the majority of his net worth. He might also be worried about his costs and income when he starts college. What if he needs that money for something more important than a car?

I have ideas on how I would handle this situation, but it doesn't answer your question so I will refrain from chiming in on that front.

CarDude

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Re: Do teens have what it takes to make right choices?
« Reply #3 on: June 12, 2014, 06:39:53 AM »
Do any of you with teens now or in the recent past think your teen(s) would have made any different choices given the optimal scenario--hard cash vs credit for a large purchase? I'm not so concerned about whether you feel a decision was right or wrong. I'm more interested in knowing whether many teens default to certain choices in key decisions simply because they've never had the cash on hand to include in the discussion.

I don't think this has much to do with him being a teen; I think he just has some money and doesn't want to lose it.