Teens at the Wheel: The costs of driving

For the past four days, I sat in a Young Drivers classroom, learning what it takes to drive safely and responsibly. I am late to driving. I was nearly 20 years older than the rest of the students. The experience was eye-opening. (Let me tell you, I do not miss high school.)

At the beginning of the course, our instructor asked why we were there. For the teens in the room, the answer was invariably “because my mom made me”. (My answer? Why am I learning to drive at 35? That’s a long story…) 

Young Drivers isn’t cheap. In fact, nothing about driving is cheap, financially or otherwise — and, sitting there surrounding by a group of teens who were eager to learn to drive, I wondered what they knew about the costs of driving, and who would be covering the costs for them. And I mentally tucked driving away as another expensive subject which we will have to broach with my boys in their future.

So your teen wants to drive

What will it cost? (in Ontario)

• MTO Driver’s Handbook (yes, technically you can check this out of the library, but good luck doing so — and reading it is essential for passing the G1 written test): $16
• G1 driver’s license (includes visual test, written test, G2 (1st) road test and a 5 year license): $158.25
• Young Drivers (optional, but after my experience of the past few days, I would require it for my boys): from $919 to $2,788 depending on the package, plus tax.
• G (2nd) road test: $89.25
• A car: let’s assume your teen will use your car. If they are going to have dedicated wheels, the costs will be much higher.
• Fuel: variable, depends on how frequently and how far they drive
• Insurance: varies greatly depending on age, gender, use, driving history, car, etc. G1 drivers often don’t pay at all, but G2 drivers will.
• Other costs: parking at destinations, added wear and tear on the car, etc.

Who will pay?

Thinking ahead for my boys, I can imagine us offering to pay for the Driver’s Handbook and Young Drivers, and requiring the boys to pay the rest of the costs of their driving: licensing fees and tests, fuel, parking, and insurance. Yes, it is expensive, but if they are motivated to drive, they’ll find ways to pay for it. I can also certainly see us taking on more of the costs if we needed the boys to drive places for us on a regular basis (for example, picking up younger siblings or running errands for a family business — not our situation, but very possible for others).

Assuming we were to choose a mid-level Young Drivers package, our costs per child will be give-or-take $1,500 (ignoring inflation). That’s a significant cost, especially when added to regular RESP (higher education) savings of $2,500 per year per child. They would have some fixed costs — the G1 license, for example — and some variable costs (gas, parking, etc). 

Learning to drive as a teen isn’t necessarily essential — after all, I’ve got to age 35 without a license, and quite happily. But understanding the costs is essential.

Forbidden topic: Talking about money

Money is one of those topics that is often forbidden or, at the very least, awkward to discuss, as a family. Money questions tend to make us uncomfortable, especially when they come from children: How much money do you make? What did our house cost? Do we have more or less money than our neighbours? Why can Sasha's family go on vacation to Mexico and we can't? Can we buy a big Lego kit? Why do homeless people sometimes ask strangers for money? More often than not, a parent asked these questions in public will quickly shush the child, and cringe inside. And even within the home, money questions aren't usually easy to answer.

I have, on occasion, been that parent, shushing my child, looking around to see who might have heard, and cringing inwardly. But the more I think about children and money, the more I realize how important it is to address and openly discuss these questions. Now when Lasse asks this sort of question when we’re out and about, I usually tell him that it is a good question, and that we will talk about it later, at home. I don't whisper, I don't glance furtively around to see who might have heard; I simply respond in a normal voice as I do to any number of other questions to which I cannot, for whatever reason, address at the precise moment they are asked. And then I do my utmost to remember to bring it up again later, at an appropriate moment -- which, in our world, generally means at home when there are no fires to put out. If we don't talk to out children about money, in all its manifestations, good, bad, and embarrassing, how in the world are they going to learn?

How we answer their questions, of course, depends on the child's age, maturity and comprehension. One trick: whenever I am stumped, when I really don't know how to begin addressing an issue raised by my son, or when he catches me off guard (it happens more often than you might think), I take the advice of Ron Lieber, the New York Times “Your Money” columnist. I tell Lasse that his question is interesting, and then I ask him why he is asking. As Lieber says, this does two things: it buys me some time to think about how I will answer, and it forces Lasse to elaborate on the question. This elaboration is crucial, I find, as it can help me understand just what he is after. 

Perhaps the most fascinating part about answering Lasse’s money questions is the insight that our conversations give me into his thoughts and his understanding of the world. Money questions are not just about money: they are about trying to understand the way our world works, from spare change to robots to hurricanes.

Mama, can I have this nickel? (carefully holding a shiny nickel he has found on our dresser in the palm of his hand) …led to a conversation about asking and taking (not taking what doesn’t belong to us), the ways in which money is different (why it’s okay to take a marble or paperclip off the dresser, but not coins), ladders (whether they are necessary for reaching the tops of dressers, and whether they are safe to use alone), and attics (our attic hatch is located above the dresser and we access it with the ladder).

Mama, can we buy Annie a real robot? She really wants one, he told me on the bus. …led to a conversation about robots (what they are and what they can do), purchases (how, when and why we decide to buy something), needs vs. wants (robots falling, as I discovered, firmly into the first category for Lasse), gifts (when we buy gifts, how we decide how much to spend and what to get, and the merits of bought vs. made gifts), and then back to robots again — which, after all, Lasse has been interested in for months. 

Mama, what if we run out of money? …led to a conversation about income (work and investments), savings (short- and long-term), basic needs (what we absolutely need — food, clothes, shelter), together with a hefty dose of reassurance. His next question — but what if a hurricane swoops up the bank and all our money flies into the sky? — is why I love, love, love five year olds. They ask the best questions. This entire path of conversation? Turns out Lasse had been chewing his weather book and the swirly pictures of hurricane clouds tossing trees and houses over in his mind. (Luckily, Ottawa is a decidedly non-hurricane-prone area.)

In many ways, we are in an easy stage. As Lasse gets older, his money questions will get more difficult to answer. But by building the groundwork now — for him (in terms of feeling he can ask us whatever he likes) and us (in terms of being comfortable answering his questions, and having strategies to do so) — I hope we’re setting ourselves up for many more years of conversation.

RESPs and postsecondary education

Lasse is five years old. He won’t be going to university for another thirteen years. And Yann is only 8 months old. He’s got even longer before his university years begin. But when the boys do go to school (assuming, for the moment, that they do), it will cost an awful lot of money. 

One of the greatest privileges I have had is to graduate from university — nine years, three degrees, two schools — with no debt. For my undergrad, Master’s and PhD, I had so many scholarships that I was, in fact, paid to go to school. It was a wonderful, if surreal, time of my life. I was paid to read, to think, and to learn. What a privilege, and what a joy. But scholarships, whilst the ideal solution to the cost of postsecondary education, are part merit and part luck. Whilst I expect my boys to strive to do their best, I don’t assume they’ll get full scholarships. We want to plan now to be able to offer them enough money to get a first degree debt-free. This strikes me as one of the best investments we can make for them: it is not only an investment in their education, but also in their start to adult life. If they can graduate debt-free, their financial future will be that much more easy to build and navigate. Yes, it is a privilege, and it is one I am only too glad to try to give to my boys. 

Even though we’re far from pulling money out of our family RESP for the boys, there are some questions that are critical to think about whilst they’re still young.

What do we want to pay for?

The costs of university vary greatly according to location (hometown, out-of-town, or out-of-country) and program. Ideally, we’d like to be able to pay for our boys to complete an average cost first degree at any university in Canada — including room and board costs if they choose to move away.

Yes, living at home would be cheaper. But there is a whole world out there, and your university years are a terrific time to start exploring it, to start living semi-independently and to experience new people, new ideas, and new ways of life. If my boys choose to go away to school, I’ll support them fully. It was four years of undergraduate education at McGill that taught me to study hard, balance work and fun, do my laundry and shop for groceries, organize my money, make lifelong friends, and to stand on my own two feet.

What will we not pay for?

The additional costs of a degree taken abroad. The additional costs of a specialized degree taken in Canada. Beer and fun money (that’s what summer jobs are for). Public transit. Cars. Postgraduate degrees. Probably other things, too, but that’s a good start.

Will any strings be attached to the money?

Yes. Oh, yes. Exactly what those strings will be isn’t fixed yet — after all, it’s a fairly long time in the future — but there will be some tie to GPA and effort put into schoolwork. 

With my scholarships, I was required to keep a high GPA. Low grades? No scholarship the next year. No excuses, no re-tries, no second chances. And let me tell you, I studied hard. Perhaps too hard. But I learned to work hard, to prioritize ruthlessly, and gained a strong appreciation for the value of someone else’s money. 

How much money do we need?

What will university cost in Canada in 12+ years, and what variables are there? Let’s look at my other alma mater — the University of Toronto. A bachelors degree in Arts & Science is currently $6,400 a year for four years, whilst an engineering degree is $14,300 a year. Assume an additional $1,000 in ancillary fees a year, and $500 for books. And residence + meals? About $13,000 a year, depending on options. Per year, then, we are at $20,900 for a BA/BSc and $28,800 for a BEng. And that’s without any travel home. Over four years, we’re looking at between $83,600 and $115,200 per child. And that’s not accounting for inflation over the coming years. 

Oof. Those are big numbers. In fact, they made me sit back in astonishment, and I like to think I am prepared for these costs. (On second thought, maybe I will encourage the boys to stay home…)

If we average those numbers out, we get about $100,000 per child (still ignoring inflation — sometimes, round numbers are nice.) 

Where is that money going to come from?

To take full advantage of the RESP’s matching grants, you need to contribute $2,500 a year per child — which will entitle you to $500 a year from the government, to a lifetime maximum of $7,200. Assuming you contribute $2,500 a year for 15 years, and receive the matching funds, you will have $44,700 — less than half of the estimated cost. Hopefully, of course, that money will be invested and grow, but even with decent growth it is far from enough unless your child lives at home. Within the RESP, however, there is an upper limit for contributions: per the CRA, the lifetime limit on the amounts that can be contributed to all RESPs for a beneficiary is $50,000. Any additional funds would have to be saved in another account — a TFSA or a non-registered account.

Without getting into how an RESP should be invested, the main take away is clear: start saving early. The year the baby is born, preferably, and save the maximum allowed as early as possible — and then hope it grows.