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Financial Literacy: How To Teach Your Teenager About Money Through Cars

If your teen is approaching the legal driving age in your state, they may have been clamoring for a while about starting driver's ed and getting a driver's license.

If you feel your teen is ready to take this step, it's a great opportunity for them to not only build skills in driving but also in managing money. This includes figure out the cost of various parts of getting a license and operating a vehicle — and earning the money to pay for them.


Map Out the Cost of Getting a Driver's License

Getting a driver's license is not cheap. You typically have to pay for a learner's permit, driver's ed, a driver's license exam and your actual license. And that's assuming you pass your exam on the first go. Fail and you'll typically need to pay the full fee again. It's a reasonable ask your teen to cover these costs.

Teen task: Have your teen do the research to figure out the total cost (assuming the pass the first time) plus the cost of repeating the exam if they fail.


Decide on Free School-Based Driver's Ed Versus Paid Driver's Ed Course

Many high schools offer a free driver's ed course for students. The problem: Demand almost always exceeds supply. Priority is typically based on your grade (seniors get priority) and then your age (juniors who were red-shirted as kids and those with late birthdays get priority). This means your sophomore with a late birthday may have to wait an extra two years to get a license if they go with the free school option. So what's the right move?

Teen task: Decide if the wait is worth the saving. Help them weigh their options by calculating the time it takes to earn the money for the paid program. For example, let's say paid driver's ed costs $900 and your teen can earn $10/hour doing certain paid chores for you or for your neighbors (mowing lawns, babysitting, pet sitting, etc.). Is it worth 90 hours of their time and labor to get their license one or two years early?

There is no right answer to this question. The goal is to get your teen into the habit of thinking of time as money when making financial decisions.


Monetary Expectations Once Teens Are Driving

Before your teen pursues getting a license, you need to have a family conversation about financial expectations once they are driving.

Here are the two big ones:

Car insurance. Even if your teen will just be driving your car, putting them on your policy will dramatically raise your car insurance premium, because your newly licensed teen will almost certainly the riskiest driver in your home. Plus, it is prudent to consider adding an umbrella policy to your insurance so that a devastating accident caused by your teen doesn't cause you to lose your home or savings. It is not unreasonable to expect your teen to reimburse you for the increase in car insurance when you put them on your plan.

Mileage-related costs. A question that new teen drivers often ask their parents is: Do I have to pay for gas? It's not a bad question, but it misses a bigger and more important point. There are two types of costs involved in driving: fixed costs (buying the car, age-related depreciation, car insurance) and variable costs (gas, maintenance, repairs, mileage-related depreciation). Those variable costs are highly correlated with how many miles you drive. You might want to have your child reimburse you for the miles they drive, with an exception for driving to school and sports practices and running errands for the family.

Human head with dollar sign icon
When your teen sees the true cost of a particular car trip, they may shift their choices. Is it worth $25 to go visit a friend for an hour?

Why Every Teen Needs To Know a Vehicle's True Operating Costs

Even if you don't expect your teen to reimburse you for miles driven, it's important that every teen has a handle on the per-mile operating costs of your family car.

Teen task: Have them calculate the true cost of driving per mile using the information in the next section below. Ideally, have them calculate the cost of every car trip they take — even if they don't owe you anything. Here's why:

It helps your teen to understand the true cost of driving. If you just charge your teen for insurance — or even insurance plus gas — it can make the cost of driving seem lower than it really. But when you factor in broader per-mile operating costs, the real cost of driving becomes more transparent. This will help your teen significantly with budgeting when they are on their own.

It's instructive to have your teen weigh whether a trip or job is "worth it." When they see the true cost of a particular car trip, your teen may shift their choices. Is it worth $25 to go visit a friend for an hour? Should they take a job a few towns away to take home an extra $12 per shift (compared to a local job) if it costs an extra $10 drive there and back? This is the type of critical thinking and decision-making you want your kid to practice, even if you don't want the actual money from them.


How To Estimate Operating Costs for Your Vehicle

While everyone's car and driving situation is unique, there's a pretty easy way to estimate your per-mile driving costs with this AAA Driving Costs calculator.1 Enter the year, make, model and trim level of your car, along with your state, whether the car is new or used, and an estimate of the number of miles everyone in your family (including, but not limited to, your teen) will drive the car. The tool also contains a sliding widget where you can specify the ratio of city to highway driving that you do. (The default is 55% city driving).

The tool will then return a breakdown with costs for fuel, maintenance and repairs, depreciation, insurance, fees and taxes, and finance charges (assuming you have a car loan).

For the purposes your teen driver, who is already reimbursing you for additional insurance costs, just focus on the costs for fuel, maintenance and repairs and depreciation. Add those costs together and divide by however many miles you originally input. This is a reasonable estimate of what it costs, per mile, to operate your vehicle.


Some limitations:

Age of the car. You can only select a car year from six or so years ago. If your car is older, though, putting in the oldest option available on the tool will give you a reasonable estimate.

Mileage. You must choose from preset options of 10K, 15K, and 20K miles per year. Simply choose the one that most closely reflects your situation.

Depreciation. Part of a car's depreciation is from its age, and part is from the miles driven. The AAA tool can't make that distinction. So, you could choose to leave it out of your calculation after discussing with your teen, or only include a percentage of it (i.e., 50%).

Important disclosure information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. AAA, "Your Driving Costs Calculator," accessed March 24, 2026. Back