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MONEY-SMART KIDS
Co-Sign at Your Own Risk
by Janet Bodnar

I am 19 years old and live at home. I work 40 hours a week at a job I've had for three years and go to school 13 hours a week. I am very responsible financially, but I don't have a big down payment to buy a car. I finally convinced my mom to co-sign a loan for me. My parents are afraid to do this because they think I could get fired tomorrow and they would have to pay my loan. I belong to a union, and I don't think this could happen unexpectedly with my job history.

The problem is, I want to buy a car with a $19,000 sticker price, but my parents are insisting on a used car for about $8,000.

You really do sound like a financially responsible young person, but I'm afraid I have to side with your parents on this one.

They are right to be concerned about co-signing a loan. Even though you seem to have a secure job, it's always possible that you could lose it. Or you may want to work less and spend more time in school. It wouldn't be fair to saddle your parents with a debt they couldn't afford.

It's also true that if for some reason you fell behind on your payments, it would reflect badly on your parents' credit record if they co-sign the loan. They may feel more confident in your ability to make regular payments if you take on a smaller loan.

One more thing: You'll probably save a lot on insurance by buying an older, used car. Put that money aside for a down payment on a new car.

Hiring your children

I would like to have my 7-year-old son work with me at my rental houses. Would the money I pay him be tax-deductible? Would putting the money into a Roth IRA for him be a good idea?

As long as your son is doing legitimate work at your rental properties, you can deduct the money you pay him as a business expense. Just make sure you handle things in a businesslike manner -- that is, keep records of the work done, the number of hours worked and his hourly wage.

And, by all means, open a Roth IRA for your son. You can contribute a maximum of $3,000 a year or 100 percent of his earnings, whichever is less.