Dave Says: Help needed for a teenage motorist at home

Friday, August 22, 2008 at 1:18am

Dear Dave,

My daughter is 16, and has just started driving. She has a part-time job and budgets her money, too. But ever since she got behind the wheel our insurance rates have been through the roof.

She’s going to pay her portion, but is there anything we can do to lower the cost without going completely bare bones on coverage?

— Barbara

Dear Barbara,

I know exactly where you’re coming from. I’ve got one of those animals called a 16-year old in my house, too.

Never go bare bones with a teenager behind the wheel. You need good, high-liability amounts of coverage. Liability is the best buy across the insurance world today, and that includes car insurance. It really doesn’t change the pricing very much, either, to run heavy on liability. I’d advise looking at a minimum of $500,000.

As far as bringing the price down, some companies give discounts for kids who complete a driver’s education course at school. There are even some companies that will give you a break if they’re on the honor roll consistently. About the only other thing you can do is get a high deductible.

— Dave

Dear Dave,

We’re thinking about adding an in-ground swimming pool. We have no debt, two kids and we make about $58,000 a year. The pool will cost $32,000, and we have $53,000 in cash savings.

We don’t know what it will do for the value of our home, but it’s currently worth about $180,000. Do you think we can swing it?

— Kelly

Dear Kelly,

It’s really hard to get your money back from installing a pool. In your case you might see the value of your home go up $10,000 or $15,000, but you won’t get your $32,000 back in the deal.

I think you’re probably looking at trading several years of vacations for this pool. But if you’re cool with that and you guys really love swimming that much, I’d say go for it!

I’d shop around for a cheaper price, though. You can definitely get a nice, in-ground pool for less than $32,000.

— Dave

Dear Dave,

I’ve heard you say that it’s really bad to lease a car, but then sometimes you talk about renting a house or apartment as a good thing. How can it be good to rent your home with a lower payment but not a car?

— Corey

Dear Corey,

You’re confusing a temporary situation with a permanent one. People lease cars with a permanent mindset. Car payments are just a way of life for most middle-class people who have resigned themselves to never getting anywhere financially.

My goal is to try and get people to reverse that mindset, because it’s virtually impossible to get rich and build wealth while you’ve got car payments hanging over your head.

Now let’s make sure you understand where I’m coming from. I don’t recommend that people lease a house or live in an apartment their entire lives. I’ve never said that. But sometimes – if you’re in a big enough mess – it’s a good idea to step back and be a renter for a short period of time so you can get your finances back on solid ground.

— Dave

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