Here's what most single moms don't know about investment risk…
It’s just as risky not to invest.
Not investing poses it’s own set of financial risks, including the chance that your savings won’t be able to keep pace with inflation, and that your money will lose its purchasing power. That’s something we single moms absolutely can't afford.
While stashing your cash in a low-interest savings account may protect it from loss, it won’t protect it from losing value. Your money will be missing out on the opportunity for growth, and that could leave you far short of your financial goals, and threaten your long-term financial security.
Here’s the problem: cash depreciates in value over time, and that’s measured in purchasing power – how much $1 buys today. And we know that what costs $10 today could cost $30...$50...$100 in the future.
I can remember all the times my granddad complained about the prices of oranges and milk, and how expensive they’d gotten. He wasn’t wrong…prices keep creeping up every year. And if you’re money doesn’t keep pace with that, you’ll be effectively losing money even if you don’t actually lose a single dollar.
At the very least, you’ll want your nest egg to keep pace with inflation, which is running between 2% and 3% right now. That sounds pretty low, but consider this: High-yield savings accounts are paying out a measly 1.05% in interest…and the average savings account interest rate is nearly nothing, just 0.06%.
That means every dollar you have in your savings account is losing 1-2% of it’s purchasing power – and over time, that adds up to a lot of lost value.
Of course, investing comes with its own set of risks, including the chance you could lose everything. But careful financial planning and creative portfolio design sharply limits your risk of total loss, and gives your money the opportunity to beat inflation…so you can live your life without constant financial anxiety.