How a Single Mom Can Build Up Her Kid’s College Fund Without Going Broke

For most single moms, bringing up kids and paying for their college education presents a major financial challenge. By learning about and undertaking the savvy investment habits outlined in this article, you will be able to save just half as much per month as with a straightforward investment plan and still gather all the savings you need to take your child through college.

What is the Price of Education?

To educate our children at an average college in the USA, it costs $33,215 per year in tuition fees alone. When we add on living expenses, the bill increases by an average $11,970 per year, and that’s before we even start to consider books and other essential items that support a successful college education.

That’s a hefty financial mountain to climb, and single moms need to focus on the long game. Nothing is more important than our children’s education, but a carefully structured savings plan will turn this into a reality.

How Much Do Single Moms Need to Save?

Let’s do some number crunching.

Our children typically start college at the age of 18 on a four-year program. If we budget for $50,000 per year (tuition plus living expenses plus other essentials), then that’s a total of $200,000 to save over 216 months (18 years).

That means the average mom should save $926 per month every month from the birth of their child up until the beginning of college to ensure that she can cover the costs. Of course, we must consider both interest rates and inflation which would effectively balance each other ou.

Making Wise Investment Choices

Many single moms struggle to get by as it is, but there are plenty of ways that savings can be made every single day.

For example, for the money it took to feed her coffee habit back in 2015, journalist Jenn Bollenbacher calculated that she could have invested in Netflix stock and gained returns of 129%. She also could have invested in Twitter stock, but this would have meant losses of 36.71%.

This is why it’s so important for single moms and those who don’t have the cash to burn to create a forward-thinking investment plan based on real-life data and focused on reliable, healthy profits. This minimizes the risk of investing in a stock that performs poorly and puts your child’s college fund in jeopardy.

There is always the option to invest all of your savings in a blue-chip stock like Apple Inc. This is usually a reliable route to take with safe returns and low volatility.

As with any investment, it pays to diversify, go down a slightly more ambitious route and mix that up with a safer choice to spread your risk. This creates a healthy and balanced portfolio, ideal for single moms who cannot afford to take a significant amount of risk and wish to find investments that offer a good level of stability with the potential for higher gains.

Creating a Balanced Portfolio

So, what would a balanced stock investment look like? For example, you could invest 50% of your savings into an Index like SPY and invest the remaining 50% of the money into a blue-chip stock. If $926 was invested 18 years ago, then the $463 allocated to an Index will generate approximately 5.6% annual return. Another $463 invested in blue-chip stock such as Boeing at the same time will produce an average 13.23% annual return.

She may then combine returns from the Index and the blue-chip for yearly returns of 9.43%. These figures show that mom could invest with just $685 a month to make the required $274,063 (equivalent of $200,000 when taking inflation into account) in 18 years, as opposed to passively saving $926 a month over the same period of time. By cutting monthly investments by a quarter, single moms can enjoy a far more affordable commitment within a realistic structure that allows for more breathing space and unexpected costs in other areas of life.

Investing in an index fund is one of the safest choices because you are spreading your risk across multiple companies. Spending 50% on an index fund and the other 50% in a blue-chip stock, in turn, is relatively safe, but riskier than the first option as you are investing 50% of your savings into one entity.

This is a great route for single moms to take as the 50/50 model means you are mixing up the risk to establish a stable base and potentially great gains. It also means having a much smaller part of your portfolio exposed to risk.

The Most Effective Tools and Strategies to Reach Your Goals

We find that using a range of tech services and tools can work together to complement a sound investment plan and help first-time investors to reach their goals within an accessible, realistic structure.

Robinhood is a widely used trading app for investing in stocks that is super easy to navigate and a must-have for every investor. Its functionality is advanced yet user-friendly, where users can — for example — create and follow a long-term investment plan by investing small amounts on a monthly basis.

Unlike many other offerings, it is entirely commission-free across all transactions with a simple interface and functionality when buying and selling orders as well as selling and buying stocks.

StockMetrix is another valuable tool for every budding investor or anyone with a set financial goal that needs a little help along the way. This app collects all the necessary information from highly credible sources such as Thomson Reuters and Zacks Investment Research. It then processes the data to generate a speedy, transparent overview of company performance at a specific moment in time. This is a great time-saving tool with reliable, informative results.

By checking out the backtest results on blue-chip stocks using the StockMetrix app, we can see the level of profits that blue-chip stock has made historically to make wiser investment decisions.

We hope you have found the tools and tips discussed in this article to be valuable in guiding your investment goals. Using such an investment strategy is the most effective way for single moms to build up a strong college fund and support their kids in gaining a high-quality education.