Early Birds and Children's Toys

I just read this fairly distressing article about the jobless rate and the state of the economy. It hits home since I'm a recent college grad and have been job hunting for months now, unsuccessfully.

The article got me to thinking about investing though, and what we can do to protect ourselves against harsh times like this.

Virtually every financial advisor would tell you to have at least 3 months of salary set aside in case of an emergency. This is sound advice, and something I'd love to be able to do - if I could start my darn career!

But accumulating 3 months' salary to simply set aside can be a daunting task. We all have numerous bills to deal with every month, and let's not discuss if you have children! I once read an article that said the average cost to raise a child in a typical middle-class lifestyle could reach upwards of $1 million after 18 years! Scary!

That's why I believe getting started early on an investment account or some type of savings is incredibly important. Even if you don't have children yet, you may face that mountain of financial responsibility someday. Wouldn't you feel better if you had some cash to buy your daughter a stuffed animal?

Most of us can probably find a way to save $50 a month. For some of you, that could simply be brewing your own coffee and not stopping by Starbucks so frequently. I took a look at what $50 a month could bring you, over the past 12 years.

To begin with, $50/month since January 1996 is $8,050 total. But if we put that money into a company we're familiar with, say Johnson & Johnson (JNJ), today that would be worth $26,910.50. And why not buy Johnson & Johnson? After all, they make a ton of products that you'll probably buy for a new child like no-tear children's shampoo.

A return of 234% isn't something you should expect from every investment you make, but JNJ has many of the attributes of a solid company that you should look for. They pay a healthy dividend of 2.78% and have paid it since 1987. Their CEO has been with the company since 1998, and the company has a net profit margin of over 18%.

While this isn't necessarily a recommendation to run out and buy Johnson & Johnson, perhaps it couldn't hurt! My point is simply that the earlier you start investing money into companies with solid fundamentals, the sooner you can sleep better at night, even if a financial crisis like this current mortgage mess comes along.

>> By the way, I run all of the "what if" simulations through the website I invest with, Sharebuilder.com. They don't pay me or anything to recommend them, but I wholeheartedly do so. This link will take you to their "What If I Had Invested" tool, and it's free to use!