Establish a Car Replacement Fund for the New Year

My father always told me that the only things in life I should borrow money for were a home, a home improvement, and my education.

Everything else should be paid for with cash.

“If you can’t afford to pay with cash, you can’t afford it,” he told me.

I think this is good advice for everyone, including family child care providers.

This means that child care providers should pay cash for their car.

Of course this is difficult for many to do. Most child care providers, like everyone else, put some money down and take out a loan to buy a car. As a result, you pay interest on your loan. Money you spend on interest could instead be used to meet other short or long-term financial goals.

Here’s a plan for how to establish a car replacement fund that will allow you to pay cash for your car.

Step One: Hold onto your current car for as long as you can and pay off any debt on it as soon as possible.

Step Two: Start putting aside money into a savings account each month for your next car.

Step Three: When you have to buy another car, make as big a down payment as you can using the money you have been setting aside and other money you may have at the time.

Step Four: Pay off the new car loan as fast as possible and continue setting aside money for your next car.

Hopefully, each time you buy a car your down payment will be substantially greater until you are able to pay the full amount in cash. This may take you a number of years before you can meet this goal. But it’s worth it!

We live in a car-obsessed society that urges us to buy fancy new cars every few years. But most of us can’t afford to do so. Many child care providers buy used cars and don’t spend more than they have to. Paying cash for a car will help keep your car expenses down and help you meet other financial goals.

I’ve written a handout that describes in more detail how to establish a car replacement fund.

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Tom Copeland

I've been the nation's leading trainer, author, and advocate on the business of family child care since 1981. I'm a licensed attorney and have presented hundreds of business workshops for family child care providers across the country. I answer thousands of calls and emails each year to help providers, tax professionals and trainers understand complex business and tax issues. Call me at 651-280-5991. Email me at Visit me on Facebook. From 1981 to 2009 I worked at Resources for Child Caring in Minnesota (now called Think Small), where I was director of Redleaf National Institute for 15 years. I've written nine books on the business of family child care published by Redleaf Press, a division of Resources for Child Caring. I was on the board of directors of First Children's Finance, a non-profit organization providing low interest loans and consulting and technical assistance to help family child care providers suceed as a business. They operate in Minnesota, Iowa, Michigan, North and South Dakota, Kansas, Missouri, and Texas. Here are some YouTube videos of me talking about my work with this organization and the business of family child care. I graduated from Macalester College (BA) in 1972 and from William Mitchell College of Law (JD) in 1980. I live in St. Paul, Minnesota with my wife Diane and two cats, Duke and Ella.