Expert: Gina Boykin - 7/25/2008

Question
I am a single mother of 3 with 2 jobs-full-time pays 12.60hr and part-time pays 8.50hr @ 20 hrs/wk. Is there anything that I can afford to invest in that may benefit my children later in life or even help me later? I am currently in school online so I plan to get a career someday but I'd like to start something now.

Answer
It's great that you want to start investing now, but as a first step, do you have an emergency fund?  Because you are a single parent, it is even more important for you to have a large emergency fund. If anything happens to you such that you cannot work temporarily, or if anything happens to your vehicle, you could easily enter a major financial setback unless you have a good emergency fund.  Most financial advisors suggest that you have 3-6 months worth of your total living expenses in this emergency fund.

Making sure that YOU are setup financially well is the best thing you can do for your children.  By making sure that you have little debt, and lots of savings and investments, you can show your children valuable financial lessons that they can take into their future.

If you have goals that are more than 5 years away, you can invest money through a Roth IRA.  A Roth IRA is a retirement account, so you should really use this to begin investing for retirement.  However, after 5 years, you can withdraw your contributions (but not your gains) without any penalty.  Since the money is already after-tax funds, there's no taxes when you withdraw.  A Roth IRA is not an investment - it is a type of account.  You can invest in stocks, bonds, mutual funds, and even low-risk investments like money market funds through a Roth IRA.  For more information on Roth IRAs, check out investopedia.com and one of the major brokerage firm's websites (fidelity, vanguard, charles schwabb, etc).

Once you land that dream career, then you can take advantage of the company's 401k or 403b plan.  Most companies provide a company match (free money!) where they deposit 50 cents or a dollar for each dollar that you put in.  This is an even better way to save for retirement, but you won't be able to get the money out early without penalties and taxes, so money that's put in should be left in.

Now for your children.  I believe that the best thing out there for saving for college is a 529 plan.  When you invest in a 529 plan, the money grows tax-free, as long as your child uses it for college. The best website that has a lot of information on 529 plans, including how to chose a good one, is www.savingforcollege.com.  Even grandparents can contribute to the 529 plan as a way to give directly to a child's education!  Depending on the state you live in, your state-sponsored plan may also give you tax breaks if you invest in their plan.  Many plans allow you contribute as little as $10 or $25 at a time.

I hope this is helpful information to get you on the right track, but if you find you have questions after going to these website, let me know!