Here’s a wake-up call for anyone who still thinks the “typical” American family consists of a two-parent household: Today more than 20 million children in the U.S. live in single parent households.
That’s more than a third of our children, up from less than a quarter of American kids back in 1980.
With one person playing mom and dad (not to mention cook, chauffeur, teacher and everything else), single parents’ schedules are often already stretched to the breaking point. But it’s critical to make time to put together a financial plan.
“Since single parenting means a single income source, making the right moves financially is that much more important,” says Dale Terwedo, a financial advisor with Terwedo Financial Services in Edmonds, Wash.
If you’re flying solo with the kids, follow these seven steps to make sure your finances stay on track.
1. Create and stick to a budget
“Many people don’t realize how much money they actually spend each month on things like coffee and lunch,” says David Walters, a certified financial planner with Palisades Hudson Financial Group in Portland, Oregon. “Establishing a budget and adhering to it can help save hundreds of dollars a year and has the added advantage of highlighting where you waste the most money.”
2. Address ‘what if’ scenarios
Estate planning is important for all parents, but it’s even more so for single people who have no one else to fall back on, in many cases. “Determine who will take care of your child in the event of your illness or death,” advises Charles Weinrich, first vice president with SunTrust Investment Services.
“Make sure you’ve got adequate insurance coverage. Work with an attorney to get the rest of your estate planning documents in order, including a living will, health care and child care proxies, and allocate specific assets or insurance to address these issues,” adds Weinrich. Set up a trust to benefit your children and name an appropriate trustee of the assets, who may or may not be the children’s guardian.
Carefully review your employee benefits to make sure you have disability insurance coverage. “If not, think about purchasing an individual policy,” says Shelley Cabangon, senior wealth planner for PNC Wealth Management.
3. Review financial documents
If you’re recently divorced or widowed, reevaluating financial documents is critical. Make sure your accounts are registered under the proper names and that beneficiaries have been established or changed, if needed. Additionally, says Walters, speak with your financial advisor about your current risk tolerance if you have any investment accounts. Pursuing an aggressive investment strategy is favored by many families who feel they have adequate wealth – but single parents may feel differently.
4. Pay yourself first
Most people should have an emergency fund with at least six months’ worth of expenses saved – but when you don’t have the safety net of a second income, it’s even more critical. Make saving a priority, even if it means downsizing your lifestyle.
Then move on to retirement savings. “Don’t put off your own retirement savings in order to give your child an elevated lifestyle,” says Kelly Long, a certified public accountant with Shepard Schwartz & Harris in Chicago. “Take care of yourself financially so that you model financial responsibility while also avoiding becoming a burden on your child later in life.”
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5. Don’t let your kids send you on a guilt trip
Single parents often feel guilty for not spending enough time with their children due to work commitments. Don’t try to compensate with cash. “Money isn’t a cure for guilt,” says Scott Halliwell, a certified financial planner with USAA. “Don't succumb to guilt-driven purchases that blow your budget. It can wreak havoc on your financial situation and teach the wrong behaviors.”
6. Get support
Network. Many mom networks, for example – even if they’re not geared to single mothers – are forums for swapping tips on bargains and things like child care, gently used clothing, sports equipment and other money saving strategies, says Clare Levison, author of Frugal Isn't Cheap: Spend Less, Save More, and Live Better. There are also single dads’ meet-up groups and other resources for single fathers.
7. Strike a balance
When you’re home, be with your family. When you’re at work, make sure your children understand why it’s important for you to work and that they know not to interrupt unless there is an emergency, says Leslie Tayne, a financial attorney with the Tayne Law Group who’s also a single mom.
“It can be tough to maintain focus when you’re pulled in so many directions and are responsible for making all the decisions,” she says – including the financial decisions. “No one can do it all. Lean on friends and family for babysitting. Take time for yourself when possible.”