Smart Money: Child should be responsible for insurance premium on car

Dear Bruce: I am 62 and have had guardianship of a child since her infancy. She is now 16 and, like a lot of teens, wanted to get her driver's license on her birthday. We just have one car that is 12 years old. I called my insurance agent and was told I wouldn't need to put her on my policy until she actually got her license. They said that, since she will occasionally use my car, she would be covered as a member of the household. On her 16th birthday I added her to my policy. My premium jumped an additional $600 a year. We live from paycheck to paycheck. In the last few months, I have learned that others did not notify their insurance companies that their child had obtained their license because they knew their rates would increase especially if the child got a traffic ticket. Auto insurance is mandatory in the state of Illinois. My daughter says I worry too much, but I can't help but be concerned. What are your thoughts? Faithful Reader, via e-mail

Dear Faithful Reader: I don't think you worry too much at all. I think you did what was appropriate. While I know this $50 a month is hurting, I see no alternative other than to not have this 16 year old licensed unless she wants to pay the premium. Why would that be so difficult? A 16 year old certainly can find a job slinging burgers, if nothing else, where they could easily earn this kind of money. This should not put an additional burden on you. If she wants to drive, she ought to pay.

Dear Bruce: I remarried 10 years ago, bringing with me two children from my first marriage. It is my husband's first marriage. Together we have a young daughter. I offered to sign a prenuptial agreement before we married, but my husband refused the offer. Now it seems my husband has never changed his will. He owns his own business and it is my understanding that his will left the bulk of his estate to nieces and nephews. He says he has no need to change his will because the government steps in and will see that the proper people get the inheritance in accordance of the law. Is he correct?

I am assuming, of course, that my daughter and I are the ones he would want to receive the inheritance. Also, as a business owner, he pays himself only on an as-needed basis. Not a good business practice in my book. The other day he left the house and we had less then $3 in our household checking account. This is the only money that I have access to, and it is not uncommon for him to do this to me. If he should become disabled or die, what are my options? How do I take care of our daughter? How do I take care of business expenses? He seems to think I could just go to the bank and have my name added to the business account. G.Z., Sheboygan, Wis.

Dear G.Z.: It seems to me that your husband either is ignorant of what he should be doing or has ulterior motives. He should have a proper will drawn. If the other will excludes you, even though it was dated before your marriage, you have an interest (in most states) of one-third of his estate. This business of "the government will step in" is nonsense. Have a will drawn by a proper attorney. That is the appropriate way to make it happen. As to his paying himself on a need-only basis, while this may be a good tax practice, once again your husband is not displaying financial maturity. Under the current will, I don't know who would get the business. A major portion of it may go to these nieces and nephews. Sit down and talk to your husband and tell him the hard facts of life. If he doesn't want to discuss it, tell him that he will have to discuss it with your attorney when you are filing for divorce. It's that serious.

Dear Bruce: My 24-year-old son recently returned home after undertaking a three-year adventure traveling the country. He has returned home with numerous outstanding debts. He is working and planning to continue his education. Do you recommend that he contact each company to which he owes money or should he go to a credit counselor to make the contacts and arrangements? How reasonable are companies in resolving the problem, or do they frequently pursue legal action instead of cooperating? T.W., via e-mail

Dear T.W.: I think it's great that your kid can be a free spirit and spend three years traveling the country for adventure. Now it's time to return to reality and be an adult. I'm delighted he's going to continue his education, but for now it seems to me he ought to be working on getting his obligations paid. At 24, there's no reason he can't work two full-time jobs and a half-time job.

It will be a test of his character whether he is going to try to pay for his good times or try to stick somebody, which is precisely what we are talking about when you say "negotiate" and go to credit counselors. It's one thing to get in over your head because of circumstances. But this kid decided to be a nonproductive citizen for three years and now he apparently is not prepared to pay the piper. I propose that he do as I prescribe.

You might tell him that he will either remain a boy or become a man depending on how he handles this problem. No matter how strong your financial circumstance is, in my opinion you will do him a disservice by helping him out with these obligations.

Dear Bruce: My wife, age 34, recently quit her job to be an at-home mom. She had participated in a 401(k). The plan is worth about $15,000. In about five years our kids will be in school full-time, and she would then like to go back to work. What would be the best way to invest her $15,000 for now? R.S., Indiana, Pa.

Dear R.S.: Your wife may have to shift her 401(k) into a self-directed IRA, which means that you will have to choose a third party (i.e., broker, banker, etc.) to handle the transition.

Whether your wife returns to work in five years is irrelevant to any decisions that you make now. It is simply a matter of determining what your collective risk tolerance is and where that money would be best invested.

The word "best" is a very subjective term. It is my continued belief that for people your age, solid American companies are the way to go. There are some sectors that I would be wary of (those that are subject to high volatility), but over the next 10 to 30 years you will be well rewarded.