Single parents face a more challenging task of managing their finances with only a one-income household. Here are five financial planning tips for single parents that will protect them and their families.
1. Create a safety net
Probably the most important financial planning principal is to have an adequate emergency fund that will act as a financial safety net. Generally, single parents should have at least six month's worth of expenses in an account that will remain untouched until the need arises, according to Huffington Post.
2. Insurance should be a priority
Although saving enough for medical emergencies is nearly impossible for single parents, medical insurance should be a priority as unexpected medical emergencies can hugely drain a family's cash flow. Many health insurance plans include regular check-ups for the parents and their dependents, which can be used to a family's advantage.
Aside from medical insurance, life insurance policies can secure a child's future, which will also depend on a family's financing needs. Determining the amount of premium to pay usually considers the living expense of the child and education.
3. Follow a cash flow plan
Following a cash flow expense plan can help families stay on a budget especially when there is less money to go around. Remember though to still leave room for purchases that will allow parents to enjoy themselves such as going to the spa or a enjoying a nice cup of coffee every week.
Keeping a family's financial plans from going out of the budget can help avoid giving into impulse purchases. Staying on a budget also teaches kids about money to help them understand why parents may not be able to afford certain things.
4. Include estate planning
In the unfortunate event of death or incapacitation, parents would want their children to be well taken care of which is where estate planning comes in. Single parents should plan their will and choose an executor so that the child can receive the money left to them at an appropriate age and time.
5. Plan for retirement
Many single parents make the mistake of forgetting about their own future stability upon retirement since parents have the tendency to fulfill their child's immediate needs first, according to DNA India. Kids can go to college on a grant, scholarship or loan but a parent's earning capacity may diminish over time.
