College-age son should invest for himself

Q my son is entering college and wants me to invest the savings from his job. We have already saved enough for his education and I'd like his money to be around for him when he finishes school. What would earn a higher interest rate than a savings account, but also be there for him in four years?

Name withheld, Jefferson, Wis.

A "Once young people reach maturity, they should start to do their own saving and investing," says Paula Hogan, a financial planner in Milwaukee. "He should make his own investment decisions."

She recommends that "he put part of his earnings into a Roth IRA, up to the $2,000 annual contribution, if possible, and the rest into a savings account."

Finally, she says, "your son should be aware that financial markets may produce lower returns in the next few years, and that if that happens it isn't because he is somehow financially inept, but because of economic changes."

Q I will turn 60 next year and will draw a pension of $35,000 per year. I still plan to work another 15 years. My wife and I also have $800,000 plus in 401(k) and SEP accounts. Should I continue to make tax-deductible contributions to these retirement accounts, or am I better off paying the taxes on them now?

F.K., via e-mail

A "Keep chuckin' the money into the retirement accounts," you need the tax breaks they provide, says David Caruso, a financial planner in Manchester-by-the-Sea, Mass. and author of "Let's Talk Money," Chandler House Press.

He also notes that contributory retirement accounts such as your 401(k) are usually beyond the reach of lawsuits, unlike other accounts, should you ever be sued.

Q I have no credit cards or credit loans, but would like to borrow $10,000 from a bank to fund a new business. How can I obtain the loan?

Name withheld, Pennsylvania

A It will be difficult without a credit history.

Most lenders use a scoring system for loans based on your annual earnings, job history, and credit record.

In your situation, banks would likely need some form of collateral equal to the total loan amount, along with an assurance that the business will be productive, banking experts say.

Questions about finances? Write:

Guy Halverson

The Christian Science Monitor

500 Fifth Ave., Suite 1845

New York, NY 10110

E-mail: halversong@csps.com

(c) Copyright 1999. The Christian Science Publishing Society