Sometimes it’s uncomfortable discussing family financial values with others. That’s my goal in the next few weeks. I want to share the decisions made by other parents regarding their children and money. How do other people prioritize? What do they pay for and what don’t they pay for? According to my children, all of the other kids get whatever they want. I know that’s not true…but now I have research to validate my decisions.
My sister, who I love dearly, lives in a rural area of the country. She works as an HR executive at a Fortune 100 company. Needless to say, her cost of living is very different than mine although her income and resources may be similar. Her youngest child is turning 16 this week and they are letting her pick out a car for her birthday. Her older son also received a car for his 16th birthday. My children, who are from a suburban area, are up in arms about this decision. Why didn’t they get a car for their 16th birthday? They are “so mistreated”. Of course they are saying this from the safety of their boarding school. I explained to them that we chose to spend our dollars on private school. Unlike their cousins who need a car to get around, their friends are just down the hall…and they can Uber anyplace they want.
But families are all different. We used to live in a suburb in which many children did get cars for their 16th birthdays. Sometimes these cars were BMWs, Mercedes or Porsches. My sister’s kids got a used Nissan and a used Toyota. We all have different financial situations and values.
Spectrem Group asked households with $100,000 to $25 million of net worth if they had contributed to the purchase of a car for their children. What did we find? More than 80% of households provided some assistance in purchasing an automobile for their children. While 20% provided "extensive help" (probably purchasing outright), the largest percentage (46%) provided some assistance. This is what my sister is doing. They paid for half of the used car and my nephew has a small loan for the rest. He has a part-time job during college and works in the summers. I think they still pay a lot of the loan on his behalf but he is expected to contribute. And he pays his auto insurance. Note in the chart below that parents are less likely to pay for auto insurance than pay for the purchase of a car. Not surprisingly, these percentages vary somewhat by net worth…but not extensively.
This data does not help me extensively with my own children, but that’s the way it is. Perhaps this information can help you in making your own decisions regarding purchasing a car for your children. How much should you contribute? Should you feel guilty for buying them a car? Absolutely not. Should you feel guilty for not buying them a car? Absolutely not. Parents can’t judge one another because we all have different situations. But it’s nice to have some back up information.