College student wants to start investing

Dear Dave,
Im in college and 21 years old. Ive got $1,000 in the bank for my emergency fund, plus Ill be debt-free in about six months. Is it too early to begin saving for retirement?
Andrea

Dear Andrea,
You could start a retirement fund, but Id start a graduation fund on top of your emergency fund. Youre going to experience lots of transition in the years after college with new jobs, new locations and new relationships. All these things are going to require cash because you dont want to start your new life by going back into debt.

Once you have this in place, Id suggest investing in mutual funds and maybe a Roth IRA. If you do all this at your age, youll have a great start in life and you can look forward to being a very rich, little old lady when you retire.
- Dave

Co-signer wants out of loan

Dear Dave,
I tried to be a good son and cosign on a home loan for my mom because her credit isnt very good. The loan was at a high interest rate, but the loan officer we spoke with said that even if things went bad, it wouldnt go against my credit. Right now, Im trying to save up the money to buy my own home. Is there any way to get my name off this loan? My younger brother still lives with her. He has a good job, good credit and said hed cosign if thats possible.
Anthony

Dear Anthony,
First of all, the loan officer you spoke with is wrong. If this loan went bad, it would definitely count against your ability to get a house because you have a contingent liability on your moms loan.

Id look at paying back a chunk of this loan if possible, and then help your mom try to refinance the loan at a lower interest rate. But don't have your brother cosign because he'll just inherit your mess!

Your mom will be paying less money to the mortgage company every month, and youll have the monkey off YOUR back so you can go and buy the house you want.
- Dave

Severely ill foster child needs

Dear Dave,
My husband and I have adopted a foster child who is severely ill and will always be in need of care. We love her to death and dont want our older children to feel that theyre financially responsible for her when were not around. We heard about an insurance plan that doesnt pay until the parents die, but what do you think?
Laurie

Dear Laurie,
A special needs trust is a great plan. Id go with term life insurance until I had enough cash built up to fund the trust with a mutual fund.

Term insurance is very inexpensive. The plan youre talking about is a second-to-die plan, which usually ties you into some kind of cash value program. Whatever you do, stay away from cash value insurance like its a rabid dog. Its a bad product.

Youre great parents for looking at the future and making sure you provide for this special little girl.
- Dave