Financial planning is of even greater importance to single parents.
Rearing children is no simple task.
It takes immeasurable time, energy, effort, and money.
You are rearing children alone.
This brings more challenges.
According to a recent CNBC article titled “Five financial essentials for single parents,” you will need to be more intentional with how you use your income.
Doing so will help you provide for your children and also for your retirement.
Create an emergency fund.
This fund should remain untouched unless, well, you have a financial emergency.
How much money should this fund contain?
It should hold about three to nine months of expenses.
This includes costs for your children, like clothing, food, school supplies, or sports fees.
How will your children be financially supported if you die or cannot work?
Life insurance and disability insurance can be vital to helping with this.
If you own a home, you will likely need insurance for flooding or other possible structural damages.
Be sure to work with an experienced professional to determine the right amount of coverage for your needs.
Establish saving goals.
What are your financial goals?
Would you like to purchase a home?
Perhaps you want to help your children pay for college.
Maybe you want to go on a family vacation.
Whatever your goals, you will need to plan for them financially.
They will have different timelines.
Some will be short-term, others will be long-term, and others somewhere in-between.
Invest your money for each goal according to the timeline.
Set a percentage for savings.
Is there a magic number.
It is recommended that you save between six percent and nine percent of your income.
This is not always feasible.
If you can afford to save even $10 dollars per month, do it.
As your income increases, you can increase your savings accordingly.
Ideally, you should save 10 percent of your gross income and increase your savings as your salary rises.
Develop a retirement plan.
How much should you save for retirement?
This depends on your current standard of living and how you want to live in retirement.
If you are okay living modestly, you may be able to get by with half of your income saved.
If you make more and have a higher standard of living, then you will want to save between 85 percent and 90 percent of your income.
Does your employer provide a company match?
You should at least contribute enough to maximize the match.
This is "free" money for you.
What if you do not have a workplace plan?
You should set up an Individual Retirement Plan and make automatic deposits.
Do not neglect saving for yourself.
Being a single parent is no small task.
Planning your finances can help.
Reference: CNBC (August 20, 2018) “Five financial essentials for single parents”