MW I'm 42, a single parent with $372K. I won't invest in the S&P 500. Am I wrong?

By Quentin Fottrell

'I am not comfortable putting too much cash in stocks, especially given I have two young kids'

"I have no debt, no house and no car." (Photo subject is a model.)

Dear Quentin,

I'm a 42-year-old single parent with two kids who are both under 7 years old. Annual salary income: $70,000. Monthly support income: $3,000. I have $190,000 in a 401(k), which I am maxing out, and $40,000 in a Roth IRA, which I am also maxing out. Investments: $52,000. Cash, mostly in a high-yield savings account and CDs: $372,000.

Monthly expenses, including rent, total $4,000. I am aware that I am way behind in my finances, but I am not comfortable putting too much cash in the S&P 500, especially given I have two young kids. I have no debt, no house and no car. What is your advice to help me improve my financial situation?

Hard Worker

Don't miss: I'm 70 and received $300K in a lawsuit. What do you think of my investment plan?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

You are allowing your fear and caution to rob you of future returns on the stock market.

Dear Hard Worker,

You're not behind. You're doing great.

The clue is in your question. Be not afraid. Having $372,000 in cash when that makes up more than 50% of your total portfolio is not behaving in a safe and secure manner. You are, instead, allowing your fear and caution to rob you of future returns on the stock market. Investing in stocks is not gambling. Investing in one stock is gambling.

Investing in several funds, in the U.S. and overseas, can help you reap the benefits of economic growth over the next 30-plus years so you will have enough money to retire when the time comes, providing you with an income so you can enjoy your leisure time, watch your kids grow up and spend time with any grandchildren you might have.

If you invested your $372,000 lump sum in the stock market and left it alone for 30 years, you could expect to have somewhere between $2.1 million and $2.8 million, conservatively speaking - and potentially as much as $6 million if the S&P 500 SPX performed at a historical average of 10% return over the next 30 years before inflation.

I hope this convinces you that leaving such a large amount of money in savings accounts and CDs is too conservative a move, especially if you want to leave money to your children. At a 10% return, you'd have $598,000 after five years, $967,000 after 10 years, $2.49 million after 20 years and $6.47 million after 30 years.

Investing in stocks is not gambling. Investing in one stock is gambling.

That assumes an average gain over time and does not account for recessions and market corrections, and for good years and bad years. The other missing links in your financial strategy include investing in real estate (preferably a family home) rather than renting, and setting up 529 tax-advantaged plans for your children's college education.

Contributing $300 a month per child for 12 years, assuming a 7% annualized return, would give each of your children approximately $73,000 for their college education. It now costs an average of $11,600 a year for in-state public four-year college and $30,700 for out-of-state public four-year college. Those costs are only going to increase.

It's amazing that you have no debt. You are raising two children on an income of $70,000 and have managed to save a substantial amount for your retirement and for your children's future. But there are "good" kinds of debt (such as a mortgage) and "bad" kinds of debt (credit cards and buy-now-pay-later loans).

If you bought a home for $500,000 with a $100,000 down payment with a 6.5% fixed rate over 30 years, you would be paying roughly $2,530 a month before taxes and insurance. Meanwhile, if you were paying $2,500 a month in rent for your home, you'd pay $1.4 million over the next 30 years, which accounts for a 3% annual increase.

There are 'good' kinds of debt, such as a mortgage, and 'bad' kinds of debt.

Now let's look at the bigger picture and why you're being so hard on yourself in terms of your savings and investments. Most financial advisers suggest that by the time you're in your early 40s, you should have saved two to three times your annual salary. You're well beyond that goal. Most people would love to be in your shoes.

"The point of benchmarks isn't to make you feel superior or inadequate," says T. Rowe Price, "it's to prompt action, coupled with a guidepost to inform those actions, even if that means staying the course. If you're not on track, don't despair. Determine the percentage of income you may need to save going forward."

Automate your savings. "Focus less on the shortfall and more on the incremental steps you can take to rectify the situation," it adds. "Make sure you are taking advantage of the full company match in your workplace retirement plan. If you can increase your savings rate right away, that's ideal. If not, gradually save more over time."

Thanks to your conservative spending habits and focused saving, you have the world at your feet. Keep at least six months' worth of expenses in an emergency fund to cover unforeseen costs. Don't miss your annual checkup with your primary-care physician, and keep doing what you're doing. Believe it or not, you're ahead of the game.

Related: My parents promised to split their estate 50/50, but my mother gave my brother real estate. Is that fair?

Previous columns by Quentin Fottrell:

'He is increasingly angry': My troubled son lives with me. How do I ensure he is financially secure after I die?

My boyfriend, 69, moved in. He refuses to pay more than $1,300 in rent and won't do yard work. What should I do?

I'm 67. My wife, 48, is financially illiterate. How do I teach her to manage our money? After all, I won't be around forever.

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-Quentin Fottrell

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October 17, 2025 05:30 ET (09:30 GMT)

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