An Atlanta mother called The Ramsey Show with an unusual question: her 15-year-old daughter is a successful social media influencer, earning between $8,000 and $10,000 a month. Her manager projects that she could make $100,000 next year.
Now the teen has her heart set on a new Jeep Wrangler, which would cost the teen around $50,000 — far more than her siblings spent on their cars and even more than her parents’ car is worth.
The daughter has the cash, so the issue isn’t debt — but her mom wonders if it’s reasonable to let her daughter spend so much on a car.
What should she do? There are a few factors to consider beyond the price tag.
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What to consider before letting her 15-year-old spend $50K on a car
Hosts Rachel Cruze and Jade Warshaw are impressed by the teen’s entrepreneurial spirit, but point out that affordability is about more than having the money in the bank to pay for a purchase. Here are a few other things that the mom should consider:
Long-term financial savings
According to the mom, her daughter already has a fully funded Roth IRA and $32,000 in a brokerage account. The car can be paid for in cash, which means no financing and no debt. This is definitely a good start.
Is the income guaranteed?
This is a major wrinkle in the plan. The manager projects the daughter will make $100,000 next year, but the influencing world can be fickle. A change to the social media algorithm — or the banning of a platform like TikTok — could change her income drastically. Spending as if her income will be $100,000 forever might not be a smart move, especially when she could be saving more for college or retirement.
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Other costs to consider
While the hosts don’t touch on the long-term costs, it needs to be considered. The car may cost $50,000, but costs such as gas, insurance, repairs and maintenance add up. For example, the average yearly maintenance for a Jeep is around $910, and the average 16-year-old (the youngest age allowed to have a driver’s licence) can expect to pay over $5,000 a year for car insurance.
Cruze also explained that it’s important to teach kids that “our stuff cannot own us.” She encouraged the mother to use this as a teaching moment: a $50,000 car at 15 could create unhealthy ties between identity and possessions.
Instead, the hosts recommend letting the daughter spend between $15,000 and $25,000 once she reaches legal driving age, which would strike the balance between celebrating her success and keeping her grounded.
Teaching kids the long-term impact of large purchases
Large purchases are about more than affordability. They shape how kids view money, identity and responsibility. Warshaw points out that just like it takes time to grow a following, it takes time to develop the maturity to handle large financial commitments while maintaining a strong sense of self.
If all of the teen’s accounts are in good standing — with no debt and investments already started — then yes, she can technically buy a $50,000 car in cash.
But the bigger question is whether she’s ready for the social and emotional impact: the expectations from friends, the image she projects and the responsibility of driving such an expensive vehicle as a novice driver. For example, even a fender bender could cost thousands to repair.
Beyond that, there’s also the difference between wants and needs. She may want a brand-new Jeep, but she doesn’t need it to get around safely. Just because you can afford something doesn’t always mean you should buy it. That money could often do more elsewhere.
For example, if the daughter spent $20,000 on a car and invested the remaining $30,000 in her brokerage account, that money could grow to nearly $140,000 in 20 years at an average annual return of 8%. By that time, the Jeep would likely be long gone, but the investment could still be paying dividends. That’s the opportunity cost that’s easy to overlook when you’re young and making good money.
A reliable used Jeep Wrangler combined with an aggressive savings plan could set her daughter up for more choices down the line, which, ultimately, is what financial success is all about.
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This article originally appeared on Moneywise.com under the title: Atlanta mom asks Ramsey Show if she should let influencer daughter, 15, who earns about $100K, buy a $50K Jeep
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