Financial Tips for Single Parents
Parenting is never an easy job – and, unfortunately, it can be especially difficult if you’re doing it on your own. As a single parent, you face many challenges, not the least of which are the financial ones. But the suggestions below, may help make life easier – for you and your children.
- Create a “safety net.” On any given day, you could incur an unexpected – and unexpectedly large – expense, such as major car repair, a new furnace or a toothache-inducing bill from your dentist. Your daily cash flow may not be enough to cover these bills, and you won’t want to tap into some of your long-term investments or retirement accounts. So you’ll need to build a “safety net,” or emergency fund, containing three to six months’ worth of living expenses, held in a liquid, low-risk account.
- Purchase adequate life insurance. With sufficient life insurance, you can provide your survivors with a level of comfort and security. You might have heard that you require coverage worth seven or eight times your annual earnings, but there’s really no one “right” answer for everyone. A financial professional can assess your situation and recommend an appropriate amount, and type, of life insurance.
- Consider disability insurance. As a single parent, without the support of a spouse’s income, you could run into serious financial difficulties if you were to become ill or injured and had to miss work for an extended period. Your employer might offer disability insurance as an employee benefit, but it may not be enough to meet your needs. So you could consider adding private coverage.
- Save for retirement. It’s not always easy to simultaneously save for your retirement and your children’s post-secondary education. You will have to decide on your own priorities, but keep in mind that your children may have access to grants, loans and scholarships, whereas you have to rely on yourself for your retirement income. Consequently, you may want to put in as much as you can afford to the retirement accounts available to you, such as an RRSP or TFSA.
- Establish your estate plans. All parents need to develop their estate plans – but it may be even more essential for single parents. Your estate plans should include at least a will and a power of attorney.. A will allows you to name a guardian for your children and specifies how you will pass your assets on to them. A power of attorney gives someone the legal authority to make financial and other decisions for you if you become incapacitated. You will need to work with your tax and legal professionals to develop comprehensive estate plans.