Financial Planning

5 Crucial Financial Planning Tips for Single Parents

by Lynn LL Leong CFP

It is undeniable that the journey one faces as a single-parent is challenging but the reality of scarce resources can be quite daunting. Therefore, a carefully drafted financial strategy and prioritising to meet both family needs and self-retirement goals is crucial. Here are 5 suggested strategies for your consideration:

1. Controlled Spending
A desired healthy finance equates “controlled spending”. Budgeting and managing cash flow requires consistent discipline. Draw-up a spending table and track your spending weekly/bi-weekly. Ensure that monthly income exceeds monthly expenses. SAVE the excess income. If you are widowed or divorced, you may be receiving lump-sum insurance payment(s) or alimony and/or child support. SAVE as these payments may cease or reduce over time.

“If you buy things you do not need, soon you will have to sell the things you need” – Warren Buffet

2. Higher Emergency Fund
Being a single-parent faces unavoidable risk of losing a job or prolonged medical conditions. Sometimes, your child’s medical illness may require you to request for a short term unpaid employment to enable you to nurse your ailing child. As such, a higher contingency fund of 12-15 months is required (the higher the better) compared to the usual practice of 6 months.

3. Insurance Planning
Life, health and education insurances are essential for single- parents. The key is to purchase within your budget so as to be able to pay the premium continually. A minimum coverage is better than none. Consider a term life insurance policy as it is more economical.

4. Estate Planning
Make it a priority to consider estate planning since you are the sole provider and if you become terminally ill or incapacitated or die prematurely.
• A Will that entails the guardian of your children, executor(s) of your Will, how your assets will be distributed and/or utilized, etc.
• A Power of Attorney which gives legal right to the appointed individual to make decisions on your behalf, should you be unable to do so.

5. Retirement Planning
Create a financial peace of mind for your retirement. Start as early as possible. Money can be placed in several investment vehicles i.e. unit trusts, stocks, bonds or conservative fixed deposits.

“Do not put all eggs in one basket”- Warren Buffet

Take advantage of your company’s retirement program by participating in their pension plan. One of the most effective and reliable investment strategies is an automatic debit from pay check to selected investment accounts.

Disclaimer : The content of this post are not intended for financial or professional advice. Seek out qualified professionals on issues that are specific to your need and circumstances.