Being a Parent is an ‘amazing ride’, that comes with lots of UPS and DOWNS. If you are a single parent, or a single mom, raising kids can be even tougher. As a single parent, you will be in charge of financial and other responsibilities to protect your children, and help them prepare for the future.
Often times, this will feel overwhelming, and seem difficult. However, we are going to outline five easy financial tips to consider.
1.Look into Life Insurance
Life insurance is one of the most important financial tools, a person can take out to protect their family. Should something happen to you, life insurance proceeds would be available to raise your children.
Often times, Term Life Insurance is the best, and most affordable policy to consider. According to Matt Schmidt, CEO of Diabetes Life Solutions, “ term life insurance rates are at an all time low, and insurance companies are accepting people with all kinds of health risks. One example is life insurance for diabetics , where up until a few years ago, was difficult to obtain. Type 1 and Type 2 Diabetic life insurance rates are priced about the same, as people without diabetes or other critical illnesses.”
There are several factors to consider before choosing on an amount of life insurance, and term length. You would want to consider replacing your current/future income, children’s college funding, outstanding mortgage and other debts. Your life insurance policy can even be used to cover final expenses and burial costs.
Also, you may want to consider costs of outside activities for children participate in. Such as sports, music lessons, Camps, and any other activities your kids participate in.
One key factor to consider is naming a beneficiary. You can name a family member, godparent, or even a trust, to be the beneficiary. Most importantly, life insurance companies allow you to update beneficiaries, as your life changes.
- Consider Disability Insurance
One often looked insurance product, is disability insurance. If you are a single parent, what would happen if you couldn’t work for a 6 months, 1 year, 2 years, or possibly never again? These are questions you would want to ask yourself, and figure out how you could replace your income.
Generally, you would want a disability insurance policy that replaces about 60% of your income. Your disability policy would essentially become your ‘paycheck’ if you could no longer work. This monthly payment would pay for mortgages, child care, car payments and all the other odds and end.
Most companies allow you to take out a disability insurance policy,that would make payments for 1 year, 2 years, 5 years, or thru age 65.
- Start an Emergency fund
What exactly is an emergency fund? An emergency fund is simply a separate bank account, or money market account, that you are earmarking for unexpected expenses. Some sample unexpected expenses are as follows:
- Car repairs ( New Transmission, or engine repairs)
- Home repairs ( New Roof)
- Medical expenses
Having this type of savings account would help you avoid from borrowing money from a lending institution, or friends and family. Or putting a large purchase on a credit card, that carriers high interest rates.
Many experts recommend funding an emergency fund to meet 6 to 12 months of living expenses. You never know what the future holds, so having these savings accounts could prove to be a smart financial decision for you and your family.
- Establish a college savings fund for your children
Setting up a college fund is generally a good idea. There are several types of accounts that can ‘grow’ tax free, as long as the funds are used for higher education. Most plans also allow you to make automatic contributions, monthly, from checking or savings account.
Generally speaking, the sooner you can start contributing to one, the better. You may not be able to save enough to cover all 4 or 5 years of college, but maybe paying for 1 to years. That will at least minimize the amount of student loans your child will have to take out.
- Create a Will
Creating a will isn’t anything anyone wants to think about, but you really should look into it. At the time of your death, the ‘Will’ ensures that there’s a plan in place for your assets, to be distributed to your children.
This ‘Will’ ensures that no one can dispute how your assets are paid out. This means that your children will continue to have money for all their living expenses. You can even name a Power of Attorney, who gives someone the authority to make financial decisions, should you become mentally incapacitated.