FINANCIAL FOCUS: INVESTMENT TIPS FOR SINGLE PARENTS

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

When it comes to investing, single parents share basically the same concerns with two-parent families. They want to provide opportunities -- especially educational opportunities -- for their children, and they want their own retirement to be comfortable.

Single parents, however, face many unique challenges, especially financial challenges. Although many single parents don't earn as high an income as two working parents, one of the biggest mistakes a single parent, or anyone for that matter, can make is to assume that there are no options for building a better financial future.

It doesn't take much

Let's look at how a single parent can establish a basic investment plan. Assume a single mother who is 35 years old has one child, a 6-year-old son. She hopes her son will enter college at age 18, and while she knows she won't be able to finance his entire college education, she would like to make a contribution.

If this parent could invest just $50 a month and that investment could compound at 8 percent annually, she would accumulate between $12,000 and $13,000 by the time her son enters college. Although that wouldn't cover his entire college expenses, with student loans and her son working to pay some of his own bills, it would be a big help.

Don't put off till tomorrow...

One of the biggest investment mistakes made by both single parents and two-parent families is putting their children's financial future before their own. Many parents delay investing for their retirement and wait for "the perfect time" to invest. This is usually some landmark event, such as paying off the car or home, changing jobs or the children leaving home.

Unfortunately, there are two problems with this approach. First, people often adopt goals that take years to achieve, or worse, once they achieve their goals, they simply replace them with others, such as taking that dream vacation. The other problem with this approach is that waiting to invest costs you money.

If our 35-year-old mother waits until her son enters college to start investing $50 a month in an Individual Retirement Account earning 8 percent annually, she'll have accumulated less than $25,000 when she turns 65.

Little can mean lot later

If, however, she starts investing now and invests $50 a month in an IRA earning 8 percent annually, she'll accumulate more than $73,000 by the time she reaches age 65. That's $48,000 more than if she waits! In addition, she may qualify for fully or partially tax-deductible IRA contributions, and she doesn't have to pay taxes on the earnings on her IRA until she withdraws them at retirement.

First step toward future

Although the rates and time periods in the examples above aren't intended to reflect the performance of any specific investment, they do illustrate the importance of starting an investment plan early and sticking with it.

Time and discipline are an investor's most valuable assets. In addition, when choosing an investment, make sure you select one that's appropriate for your investment risks and that can meet your specific investment needs.

Whether you're a single parent or part of household with two working parents, remember the best time to start investing is now.

People shouldn't be intimidated by how little they have to invest or how little they know about investing.

Begin reading about investing and seek the investment advice of a professional.

Together you can determine the best strategy for ensuring a bright financial future for both you and your children.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.