Updated: Sep 14
We’re excited to be doing our inaugural blog post on personal finance tips for single parents. We’ve partnered with an East Coast based financial advisor to help answer some frequently asked general personal finance questions with answers geared towards single parents.
1. How important is having a financial plan?
Having a financial plan is very important for everyone, but for single parents who don’t necessarily have as much financial flexibility as others, it’s especially important. Creating a spending plan / budget that accounts for both the money one has coming in and big expenditures is a good way to keep track of one’s finances. One popular budgeting approach is the 50/30/20 budgeting rule where 50% of after-tax income is spent on needs, 30% is spent on wants, and 20% is saved.
Another tip to help set up a plan is to use a mobile application that specializes in financial budgeting to help calculate and track one’s income and expenditures. A simple excel spreadsheet could work as well, but some of these applications could be more user friendly and help save single parents’ valuable time. Working with a certified financial advisor could also be a good idea to help formulate a financial plan and grow one’s savings.
2. What kinds of financial goals should I set?
Setting manageable financial goals after having a financial plan in place is a good idea to help create milestones one can achieve – we’d suggest potentially having 2 to 3 goals to complete in each year. Whether it be putting savings into your children’s 529 account (a tax advantaged savings account for education expenses) or putting money into your 401k for retirement, it’s important to have concrete targets that you can accomplish. Hitting these goals each year will not only help improve your financial standing over time, but it will also boost your confidence in your personal finance abilities.
3. What amount of emergency savings should I have readily available?
Generally, it’s recommend having 6 to 9 months of living expenses saved away in an emergency fund. Though it may be especially tough for single parents to save this much money, by making this a financial goal they can help keep them focused on continuing to save money, and over time hopefully one can build up to this level of savings.
4. What are some good money habits to follow?
There are a lot of personal finance tips / good money habits people should be practicing, but one I think that’s relevant for a lot of folks is to pay down high interest debt. If you do have the opportunity to pay down debt, things like your credit card that have interest rates well above 10% are good places to start. These forms of debt quickly snowball over time due to the hefty costs of high interest and fees. Try to pay more than the minimum payment each month and if you do have to accumulate some credit card debt, try to pay that off as quickly as possible.
5. How should I think about investing / saving?
Saving is an important financial goal to have, and like we’ve mentioned earlier, having an emergency savings fund of 6 to 9 months of living expenses saved in your FDIC insured bank account is a good first step. Once you’ve created your emergency fund, another good area of savings is to contribute to your 401k if your employer offers one. If they don’t have a 401k plan, one alternative for retirement savings is to work with a financial advisor to set up an IRA (a type of retirement savings account that can be set up outside of one’s employer).
Though it may not seem like much, saving even a bit of money steadily over a longer period of time will eventually grow into a much larger sum, and will help put you in a position to accomplish your financial goals.
We’d like to give a special thanks to the East Coast based financial advisor for partnering with us on answering these personal finance questions. We hope to do more posts soon covering other personal finance related topics that are relevant to single parents. In the meantime, if you know any single parents who have any personal finance questions or are interested in receiving personal finance coaching please have them shoot us an email at firstname.lastname@example.org. Same goes to any financial advisors who may be interested in partnering with us.