Question:   Auto loan payments are almost upon us. Our oldest child wants a car. I have the money, but I’m not sure if I should buy it for him? Should I, or shouldn’t I?

Answer:      Most teens can’t wait to have the freedom of driving their own car. But handling automobile payments can be a hard reminder for teens and their parents if not properly planned for.

You love your child and want to do anything you can to support them, but before giving in to their pleas for “new wheels”, take some time to talk to your teen and find out some important information first.

Discuss how a car would be used.? If your teen has a job, and the family vehicle is not always available, a car is a very practical purchase. However, most teens tend to see a car as a badge of “freedom” – to come and go as they please.

They have expectations of driving to school and back, ferrying friends to the movies and shopping trips, and joy riding - effectively wasting gas and money in the process. Having a car is a big responsibility and at this point in a teenagers’ life, they still need parents to guide them on a path to budgeting money.

Does your teen intend on getting a job to help pay for gas, insurance and general upkeep for a vehicle? If he or she currently has no employment, then inform them they should start seeking it if they wish to pursue their quest for a new ride.

Parents should not be expected to pay the entire expense for a car, the gas, and repairs. This issue goes beyond budgeting - it's about setting healthy boundaries. If your teen is mature enough to be in the drivers seat, he/she should also be willing to work in order to help pay for expenses associated with a new car.

Most importantly, decide early on that you will not purchase a new car with credit – pay cash or don’t buy the car yet! It is much too early in your child’s life for them to go into any sort of debt – and going into debt yourself sends the wrong message to your teen.

Auto loan payments are not inevitable, particularly if you start planning early on. Use this auto payment calculator to show your teen the true cost of financing a vehicle. It may prove to be the "eye opener" you are hoping for.

Instead of going into debt paying high auto loan payments, the two of you can work out a deal in which you agree to match the amount of money that your teen saves to pay for a new vehicle. This arrangement will encourage your teenager to be more responsible for their future driving “status”.

Perhaps after you buy the car, you might agree to pay for the insurance, but your teenager is responsible for paying the cost of their own gas. Fair is fair, right?

Best of all, the above agreement ensures that you both will avoid auto loan payments that can last for years to come, perhaps eventually even leading to dealing with debt collectors.

Editor's Note: Consider sitting down with your teen and reviewing this Free Special Guide for young adults who aspire to live a debt free lifestyle - it's called Take Control of Your Finances.

» I just made a chore chart. Is it wise to pay my kids to do chores, or is that just the price of their room and board?
Yes, making a chart that lists the weekly chores is a great idea. The process teaches kids the value of hard work and it also gives them something visual where they can see their progress.

» Living debt free - is this the most important lesson to teach my children about money?
Yes, and no. Living a debt free lifestyle is by far one of the most incredible gifts you can give your children.

» Paying student tuition is a huge undertaking. We want to send our kids to private school. Is this a wise investment in their future?
You do not owe your child a private education at a fancy prep-school. You do owe your child a loving parent who respects and manages their money effectively.

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