The troubled economy may have forced some parents to rethink the notion of a car as a mandatory teen rite of passage. Making a car available for a teen driver can have big consequences on a family’s budget and car insurance rates — not to mention the child’s safety and financial mindset.

“I really think we’re shifting to a point where we really don’t quite have that luxury in as many households as we may have had in the past,” says Judy Lawrence, author of “The Budget Kit: The Common Cents Money Management Workbook” and publisher of MoneyTracker.com.

AAA estimates that it costs $6,496 in interest expenses, gas, car insurance, maintenance and other expenses to keep the average small sedan running for a year.

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The insurance costs are based on those for a 47-year-old male. Such costs would be significantly higher for a teen driver.

“Parents pay higher car insurance rates for teens because (the teens are) more likely to get into crashes,” says Russ Rader, a spokesman for the Insurance Institute for Highway Safety in Arlington, Va.

And the aforementioned numbers don’t even include the cost of actually buying the car.

However, managed correctly, a car be “a financial school on wheels” that teaches teens valuable money lessons, says Joline Godfrey, author of “Raising Financially Fit Kids” and CEO and founder of Independent Means, a financial education firm based in Santa Barbara, Calif.

“This is a great opportunity to teach kids about a balance sheet, about hidden costs, about maintenance and sustainability — all those big ideas,” Godfrey says. “Those families that approach this as a training vehicle rather than just a vehicle are going to have a much better experience.”

Safety and maturity

Whether your child can drive safely and meet the financial responsibilities of car ownership usually comes down to one thing: maturity, Godfrey says.

Just because a child has reached the proper age to legally drive doesn’t mean he or she is ready for the substantial safety and financial responsibilities that come with driving a car, Godfrey says.

“Just because they can get a car at a certain point doesn’t mean necessarily it’s a good idea,” she says. “Helping kids develop the ability to wait — to earn things — is a long-term quality that is going to pay off down the road.”

If you decide to take the plunge, it’s important to consider the message you want to send your teen about responsibility, money management and safety, Godfrey says.

Car choice is a big part of that message, she says: “What are the values you’re trying to put out there? Is it safety? Is it frugality? Or is it keeping up with the Joneses?”

Rader says car choice is also important from a safety perspective. The IIHS’ annual analysis of fatal crashes on U.S. roads found that 4,054 teens died in traffic accidents in 2008.

While that number was significantly lower than the year before — thanks to graduated licensing laws put in place in many states — teenagers still accounted for 11 percent of vehicle crash deaths.

When deciding what car your teen will drive, keep three words in mind, Rader says: “Big, boring and slow.”

That may not jibe with what your teen wants, he says, but it’s the best way to boost the odds that your teen will walk away from an accident if their fledgling driving skills fail them.

Rader adds that “big” doesn’t include pickups and SUVs, because of their higher risk of rolling over in an accident. Instead, choose “a midsize or larger sedan that has a good crash-test rating,” Rader says. You can find crash-test ratings for new and used cars at IIHS.org.

Rules of the road

Finally, before you hand over the keys, make sure to make your expectations clear, Lawrence says.

She says giving a teen a car raises a couple of important financial questions: Where will they get the money for operation and upkeep? And if they already have a job or another source of income, will they follow through on contributing willingly or will it be an endless battle?

Lawrence recommends writing out a contract with expectations spelled out in black and white that addresses some potential points of contention.

The contract should clearly state what times of day the car may be used, how many passengers can ride in the car at one time and who those passengers can be. But it would also include answers to some money-based questions, including:

  • Who pays for damage to the vehicle in the event of an accident?
  • What maintenance tasks will the child need to perform or pay for?
  • What amount of money, if any, needs to be contributed by the child for the car’s purchase or upkeep?

Be sure to spell out the consequences for breaking any of the established rules, Lawrence says.

Godfrey adds that while a child may bristle at some of a parents conditions — financial or otherwise — “any child who is privileged enough to have (a car) needs to have the responsibilities that go with it.”

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