Buying a car: Saving for that chariot of dreams

Though saving up for the latest smartphone may have become a financial priority for many teenagers, plenty still dream of buying their own car as soon as they´ve gained their driving licence. Some may have parents willing and able to help towards the cost, but even so, getting on the road isn´t going to be cheap. From the cost of driving lessons to the ever-rising price of car insurance premiums, gaining independence - and retiring Mum´s taxi service - is an expensive business.

Saturday jobs

Most teenagers will have to take a weekend job, and work in school or college holidays to finance the purchase. There may well be budding Alan Sugars who are starting their own businesses and are well on their way to their first Ferrari, but for most teenagers, a Saturday or school holiday job is more likely.

Whether working on the tills at the local supermarket, lifting sacks of compost at a garden centre, toasting trays of loaves at a bakery or cleaning out stables, the wages earned aren´t going to be a fortune, but they can still add up to a useful sum if saved and invested wisely over a couple of years. The trick´s not to spend it all on a Saturday night, but to bank it faithfully every month - a habit well worth getting into for the rest of one´s life once the car has been bought.

Save, not spend

Teenagers can open a cash ISA (Individual Savings Account) once they turn 16. They can pay up to £5,340 a year into an ISA account without being liable for tax on the interest, and pay into it as often as they want. One teenager we spoke to had worked at his local supermarket, and had his salary paid directly into his ISA savings account - that way, he wasn´t tempted to spend any of it.

From the age of 18, you can open a stocks and shares ISA and save into this in addition to a cash ISA; the maximum you can invest tax-free in a year is £10,680. This can all be saved into a stocks and shares ISA, or half this amount can be saved in addition to a cash ISA (up to £5,340).

However, one of the ISA rules is that, once you have withdrawn money from an ISA, you can´t replace it - the £5,340 limit for paying in still applies, however much you take out. It pays, therefore, to work out a realistic budget and savings regime.

Children can run a children´s savings account until they are 16 and then do their research to find the best cash ISA, whatever they´re saving for. Lucky teenagers may find that their parents will match their savings or make a contribution to reward their hard work - the rest of us will have to take extra care to search out the most competitive savings rates and keep paying into our best cash ISAs.

This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.

Barclays is a major global financial services provider engaged in retail banking (current accounts and instant access savings accounts), credit cards, corporate banking, investment banking, wealth management and investment management services, with an extensive international presence in Europe, the Americas, Africa and Asia. With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 140,000 people. Barclays moves, invests and protects money and provides stocks and shares ISA options, home insurance, loans online, life insurance, a mortgage calculator, guides on how to buy shares and other services for over 49 million customers and clients worldwide. For further information about Barclays, please visit our website www.barclays.co.uk.

Issued by Barclays

published: 06/12/2011