Grown-Up Kids
Once your kids are all grown up, they may be completely self-sufficient. However, some children end up in difficult financial situations from time to time. They may lose a job, suffer from an accident or sickness, or lose it all in a business venture. If this ever happens to your children, they may come asking you for financial help.
In previous chapters you learned how co-signing works. It is simply a way for a person with good credit to assist a person with not-so-good credit. Presumably, you'll have better credit than your children if they come asking for help. Should you co-sign to help them get a loan? Co-signing is always risky. Before doing it, you should evaluate any alternatives. If you want to help your children, you can simply give them money, or loan it to them at an attractive interest rate. This is much safer than co-signing, and it may solve your child's problem.
You should do whatever you can to avoid co-signing. Even if you feel comfortable that your child will repay as agreed, you never know what will happen. In the event of an accident, sickness, or death, you may find yourself responsible for a loan. See if you can avoid co-signing by gifting or using another creative strategy.
If the loan is bigger than you can afford to gift (a home purchase for example), you may have to get more creative. You can take the loan out in your name only, and have your child make payments to you. If she is unable to do so, you'll know what's going on, and you won't have late payments affecting your credit. The downside of this approach is that if you're forced to sell the property, you'll be forcing your child out of her home. This would not be a pleasant experience.
