Single parents have a lot on their plates — not only do they act as the sole emotional and financial support to their children, they may also be the only financial provider for their children. Here are some of the first things for single parents to consider when coming up with a prudent money plan.
- Estate planning is your first priority. You can’t just roam around on rents when you have so much responsibilities to handle.
- Have a cash flow plan. It’s important to plan ahead by projecting your future income over several time periods. If any of the amounts will change, you have two choices: Either make up for the loss of income from other sources or adjust your lifestyle. The important thing is to have a plan.
- Create a safety net: Have an adequate emergency fund that acts as a financial safety net. As a general rule, you should have at least six months’ worth of non-discretionary expenses in an account that is separate from the one from which you use to handle daily expenses.
- Plan ahead for health costs: Go for an adequate health insurance policy, which covers both you and your child.
- Purchase life insurance. Nobody knows what future hold for us. So be prepared and secure the future of your child too.
- Prioritize your retirement savings over education. If you need to make a choice between saving for retirement or paying college tuition, in most situations, you should choose saving for retirement. A student can go to college with a grant, scholarship or loan—but your earning capacity will diminish over time.