Being a single parent often presents unique challenges, especially in the financial arena. After all, raising kids does not come cheap. Learning to balance competing financial demands can be one of the biggest challenges for single parents. Here are some suggestions that can help you get there.
Your kids see you as a superhero because that is exactly what you are to them. You are the one who keeps them safe and provides what they need. Suppose something were to happen to you and your ability to earn a living. Do you have a safety net to fall back on? Have you ever considered purchasing life insurance? Life Insurance is a serious subject that many people are afraid to talk about. Many people fail to realise the protection that a life insurance policy provides. As a mum, the most important thing you want to ensure is that your children are taken care of mentally, physically, and, above all, financially.
There are two main types of life insurance: term and permanent, i.e. whole life. Term life is designed to cover you for only the specified number of years for which you think you will need life insurance, such as while your kids are growing up. A term policy can cover you for a certain period, such as for ten or twenty years, and will payout if you die during this period. It provides families with financial security and protection they may otherwise lack. It is also the least expensive option. For less than $20 a month, you can secure a twenty-year term policy valued at $250,000. Whole life insurance is a type of permanent policy that will cover you for your entire life; it also includes a savings component known as “cash value”. After years of growth, you can borrow against the cash value or cancel the policy for the cash value.
Permanent life insurance is more expensive and complicated than term life. The important thing is to choose the right fit for your budget and your needs. Over the years, your needs, your family situation, and your life goals will change. Life insurance is designed to meet your temporary or long-term needs. Remember that you are never too young to buy life insurance!
Make a Spending Plan
When was the last time you took a look at how much money you spend? My favourite approach to budgeting is the 50/30/20 rule – although it is more of a guideline than a rule. 50% of your take-home pay would go to needs, 30% to wants, and 20% to the future “You”. If that breakdown sounds unrealistic for you right now, that is 100% OK. Everything you spend should be accounted for as a real and tangible expense. Just as rent or mortgage and utility payments come due every month, Christmas and birthday presents are bought once every year. Try to get into the habit of accounting for everything you spend.
Because everything rests on your shoulders, there is a lot of planning involved in securing your future and that of your children. Savings are just as important; in fact, they are critical. Every family, single-parent or otherwise, needs several months’ worth of income in savings in case of an emergency. A parent can lose her/his job or suffer from a long-term illness or disability. These savings are fundamental for your children, who will hopefully want to go to university.
Model Good Money Habits
Some studies show that kids’ financial habits solidify as early as age eleven. It has also been shown that parents tend to teach their sons and daughters early about money. Sons are taught to build wealth, and daughters are taught to be “responsible” with their money. Educate them on the importance of money and how it is earned. Engage your child, especially teenagers, in day-to-day chores. Initiate the practice of allocating a monthly budget for them to manage independently. Additionally, make sure you educate them about online banking and creating and sticking to a budget. The time to start teaching kids about money management, and the power of money, is now.
Save for Emergencies
“The unexpected will always be unknown,” is my daily motto. Financial emergencies are a matter of when, not if. Aim to save at least $50-100 a month (i.e. at least around £40-80 a month), if your budget allows, so that you can build your emergency fund quickly. Alternatively, you could try to secure three to six months’ worth of take-home pay, saved in a separate account.
Beyond an emergency-savings plan, a goal-based savings plan can help to make these things happen. Saving money with only one income is not always easy, but a solid budget plan can help you to discover inefficient spending habits, which lets you take control and put that money to better use. Even small changes add up monthly.
Set Goals, but Do Not Rob Your Retirement
This is that “put on your own oxygen mask before helping others” thing. Once you have your financial basics in place, you are probably going to find yourself with several, possibly conflicting, and financial goals. A big dilemma we often hear from single mums is retirement vs. saving for university. While helping your kids with the cost of higher education someday is an excellent goal, here is the truth: student loans and scholarships exist. Loans and scholarships for retirement do not exist! Therefore, your biggest long-term investing priority should almost always be your own retirement.
As a single mum, you know the importance of money and accumulating savings. This is the reason why single mums are working terribly hard from morning to evening in order to provide for their children. Finding an answer to the question ‘How do I save money?’ can seem impossible, even for the hardest-working single mums. But take some time and think about your current spending habits. Take advantage of these money-saving tips and see your budget consistently improve over time.
For more information contact Jessica Maiato, Life Insurance Sales Agent on 294-4618 to see how we can cover all of your life insurance needs.
75 Front Street, Hamilton