Family Bonds and Financial Burdens

Financial issues can negatively affect even the best of relationships. Toss in a recession, rising unemployment and high levels of debt, and the merging of family and finances can leave many people perplexed. Here are some questions readers submitted to me, and my answers:

Q: I'm on a loan with a family member. I was trying to help the person avoid bankruptcy. I've been itching to move out. How will that affect me in trying to rent or buy a new home?

A: Consider the recent results from a national survey of 1,200 people who have been unemployed and looking for a job in the past 12 months. About a fourth of the respondents have missed a mortgage, rent or credit card payment, according to the John J. Heldrich Center for Workforce Development, a research and policy center at Rutgers University. More than half borrowed money from friends or relatives to get by.

What if you had co-signed on a loan for someone now experiencing long-term unemployment? What many people don't realize is that when you co-sign for a loan -- credit card, car, home -- you are tying your financial fate to the borrower. You are equally responsible for the debt. That means your ability to borrow in the future can be directly affected by the amount of debt to which you're obligated on behalf of a friend or family member. You may find it harder to get a mortgage or even rent an apartment if you are on the hook for someone else's debt.

I know people see co-signing as a way to help, but you have to consider how much it may hurt you.

Q: My 19-year-old niece is starting to ask good questions. For example, I just finished a bathroom renovation. She asked how long it would take me to pay off the loan.

"What loan?" I asked. I saved and paid cash for it. She was shocked that anyone could have that much in savings.

"What are you saving for now?" she asked.

"Life," I replied.

Is there a book you could recommend for a college student just learning to take care of her own finances?

A: For your niece, I would recommend the new edition of "Get a Financial Life: Personal Finance in Your Twenties and Thirties" by Beth Kobliner. And keep talking to her. You serve as a living example of good money management.

Q: My 9-year-old son does not know the value of a dollar. He doesn't get an allowance, but he gets money from relatives. He knows he has to tithe on what he gets. Forty percent goes into the bank, and the rest is his to play with. I've noticed that he has been dipping into his piggy bank, which when filled goes to the bank. I don't know how to instill in him that it's important to save when he debates with me that he's saving to buy what he wants so why wait for the long term.