As a single mom or dad, it can be challenging to keep up with the ever-increasing expenses of raising a child. Without a solid financial plan, you may struggle to make ends meet.
We have a look at the importance of setting up a budget as a single parent, and we look at the financial cushioning needed to protect your child during unexpected events.
Tip: Find out which savings and investment vehicles are available for your child’s future.
Budgeting as a single parent
Lana Visser, financial planner at Fiscal Private Client Services in Cape Town, says that single parents often rely on a single income to cover all expenses.
“You need to provide a home for your child, pay their school fees, medical expenses, and general household needs and wants – and all of this has to be done with little or no assistance,” says Visser.
She believes that it’s important for single parents to budget, and be disciplined with the way they spend their income.
“While it may not always be possible to save as much as you would like, setting up a budget can prevent you from landing in debt,” says Visser.
You should also keep the following in mind:
- Invest in yourself: Your child is dependent on you, which means that they will only thrive when you do. If you improve your education or develop your skills, you can work towards a promotion at work, or branch out on your own. Make sure you spend time and money on your own development so that you can offer the most to your child.
- Keep your credit record clean: Stay on top of the debt you have, and never spend more than you can afford. One day your child may require you to sign as a guardian for their student loan, and if you have a poor credit score, they won’t receive the funds they require to pursue their dreams. Similarly, a good credit score can help you get approval for home or vehicle finance.
- Budget for inexpensive activities: Try to include fun, but inexpensive, activities in your budget. Better yet, there are many exciting options that won’t cost you a cent. For example, you can go hiking or visit the beach. Certain establishments, such as museums, offer free entry on certain days. Keep an eye out for these.
Protecting your child’s financial future
Visser says that, besides building up an emergency fund to assist with unforeseen circumstances, risk planning is of utmost importance for a single parent.
“You need to ensure that you have income protection in the event of illness or disability, since there isn’t a second household income to ‘fall back on’,” says Visser.
She adds that life cover is also important to ensure that your child’s needs will be taken care of in the event of your death.
“Make sure that your will is always up to date, and that the funds left for your child will be managed effectively and in their best interest,” says Visser.
You could open a tax-free savings account and invest your money without unnecessary costs.