When you’re a single mom or dad, managing your finances can be one of the most challenging responsibilities you have as a parent. Here are five financial strategies for single parents that can put you on the right path to security and stability.
When you’re a single mom or dad, managing your finances can be one of the most challenging responsibilities you have as a parent. Creating a financial plan, though, can substantially and positively impact your efforts to create a strong future for you and your family. In a single-parent, one-income family, there are specific things that you can do to help build security and peace of mind. To get you started, here are 5 financial strategies for single parents:
- Create an emergency fund. It can serve as a safety net so replacing your HVAC system or paying for a costly car repair won’t lead to financial disaster. An even more important reason to start saving? Your emergency fund could also help support your family during an unexpected layoff, which is not uncommon in our current economy. Start now and keep building until you have three to six months of non-discretionary expenses set aside, just in case. You’ll sleep better at night, too.
- Keep tabs on your current spending. As with most single-parent families, the bulk of your income is most likely being spent on food, clothing, housing, and health insurance. If you have younger children, childcare could also be a major expense. Determine how much is currently consumed by each category and look for ways to cut costs—a great way to fund your savings. Review your budget at least monthly to avoid any overspending surprises.
- Purchase insurance. Most people understand the importance of health insurance, but what about life insurance and disability insurance? With a family dependent on your ability to work and provide income, you need to be financially prepared if you become disabled, or even die before your children reach adulthood. No one likes to think about it, especially as a single parent, but having the proper insurance in place is one of five key financial strategies for single parents.
- Include your children. Discussing your finances, at an age-appropriate level, will not only teach them the value of a dollar, it will give them a greater appreciation of the work that you do for your family. It will teach them important money management skills they’ll need in the future and help them understand that financial decisions impact the entire family. No parent wants to worry their children with money matters, but being honest, setting realistic expectations and recruiting their help might just instill a new sense of family teamwork.
- Save for retirement. Most single parents who are stretching their last dollar don’t think about their future. Living only in the present, however, can be a costly misstep. Even if it’s only a few dollars a week, start saving for your retirement years. The earlier you begin, the greater the potential size of your nest egg, which also lowers the likelihood that you’ll be living with your children again!
While these suggestions can surely help build a stronger financial future for many single parents and children, it’s important to remember that financial situations vary among families. Be sure to speak with a financial professional who can make recommendations based on your specific circumstances.