Frankly, there is less room for error when a single parent is managing all of the responsibilities of raising a family. Five key planning guidelines are the focus of the Parent Herald's article "5 Financial Planning Tips For Single Parents For Your Family's Protection."
Here are the top five most important tips:
- Create a safety net. Most important is to have sufficient emergency funds that can be your financial safety net. Single parents should save at least six months' worth of expenses in an account that's untouched until an emergency occurs.
- Make insurance a priority. Medical insurance is another high priority. Unforeseen medical emergencies can be a big drain on a family's cash flow. There are many health insurance plans that include regular check-ups for parents and their dependents—use this to your family's advantage. In addition, life insurance can secure a child's future. The right amount is usually enough to cover the children's living expenses and education.
- Adhere to a cash flow plan. This will help a family stay on a budget, especially when there's less money coming in. Treat yourself once in a while, but avoid giving in to impulse purchases. A family budget also educates children about money and may help them understand why parents may not be able to afford some things.
- Do your estate planning. If the parent passes away or becomes incapacitated, you want to ensure your children's care. This is where you need to do estate planning. Single parents need to prepare a will and choose an executor so their children can receive the money left to them.
- Retirement planning. Your children will grow up and become independent adults, even if that seems light-years away. Start saving early, even a small amount, so that you will have some financial resources when retirement does arrive.
Reference: Parent Herald (April 6, 2016) "5 Financial Planning Tips for Single Parents for Your Family's Protection"