Single parents have a lot to handle. They not only act as a sole provider of care or emotional support for their children but they may also be the sole financial provider for their children. If you are a single parent you need to consider these things while coming up with a prudent plan.
- Build a safety net – One of the fundamental rules of money management is to build a safety net before doing anything with your money Building an emergency fund acts as a safety net in unforeseen times. Normally it is advisable to maintain an emergency fund which is equal to 6-12 months of your daily expenses. Remember while calculating your monthly expenses; apart from routine household expenses include all those expenses which you are obliged to every pay month such as EMI’s, kids school fee etc.
- Buy a Life Insurance – If your kids are financially dependent on you; life insurance is extremely critical. While determining your life insurance needs identify what you want the proceeds to do in case of any mishap i.e. pay for your kid’s higher education, repayment of loans (if any) etc and accordingly buy the cover. (PS. : If you are planning to buy a life insurance go for Term Insurance only as it is the purest form of life insurance.)
- Explore Disability Coverage – If you are the only breadwinner in the family and there is no second source of income; you should have a disability insurance as well. It helps you to protect your biggest asset i.e. YOUR INCOME in case of accidental disability and supports you with some income during those tough times.
- Retirement Over Higher Education – Usually people do anything to everything for the well-being of their kids. But if you have to make a choice between saving for your retirement or paying for your kids higher education; it is recommended to prioritize the savings for your retirement. Remember your kid’s higher education can be paid for either through scholarships or loans. But with time your earning capacity will go down and you cannot get loan to fund your expenses when you choose not to work. It may seem to be a little harsh to do so but it will help you to have a stronger financial future and you would not have to be dependent on your kids for your well – being.
- Estate Planning – Life brings along with it many ups and downs. Hence being a single parent it is essential to make arrangements for your children for the times when you would not be around to take care of them or are incapacitated. Considering this you need to have a will which specifies who would take care of your kids and how will your assets pass down to your children if you are not there. Secondly you need to have a power of attorney which specifies who would take decisions on your behalf when you are not able to do so. Lastly set up a trust for your kids which may provide for your kids well-being when you would not be there and which is overseen by a trustee.
Being a single parent is not that easy but you’ve been playing the role of a super parent to your kids. Now is the time to make sure these small steps are a part of your financial plan for your family which would help you to boost your super powers.