Posted on: 13-10-2014 in Financial PlanningSingle parents tend to face multiple challenges in their daily lives as they are the sole provider of care and emotional support to their children, and they may also be the only financial provider. This blog is designed to help make those challenges more manageable by providing guiding information and advice about financial planning. Have a cash flow plan Single parents may be subjected to irregular streams of income. Consider planning ahead of time by projecting your future income over several time frames. If any expected income changes, you have two choices: either make up the loss of income from other sources or adjust your lifestyle. Create a safety net It is important to have an adequate emergency fund that acts as a financial safety net. As a general rule, you should have a savings account or a low-risk investment account which would be able to cover at least six months’ worth of non-discretionary expenses which you could use to handle daily expenses. Set up a trust which is a legal structure in which your assets can be held for the children and is overseen by a trustee. The trustee should also be considered carefully just like when you are choosing a guardian, who can possibly, be the same person. Purchase life insurance Life insurance can also be extremely important for single parents. However, what you purchase will depend on your family and finances. To determine your life insurance needs, calculate what you want the proceeds to do. For example, in addition to covering living expenses, do you want the proceeds to pay off a mortgage or pay for college? Explore disability coverage Disability insurance can be especially crucial for single parents who don’t have a second income from a spouse to help cover the gap. Prioritize your retirement savings over education If you are pushed to make a choice between saving for retirement and paying college tuition, in most situations, you should choose to save for retirement. Your child can go to college with a grant, scholarship or loan, but your earning capacity will diminish over time. Make estate planning your priority It’s essential to make arrangements for your children for when you are no longer around. Your will tells everyone what should happen to your money, possessions and property after you die (all these things together are called your ‘estate’). If you don’t leave a will, the law decides how your estate is passed on – and this may not be in line with your wishes. You will need three major documents:
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