Savings and the Single Mom: Strategies to Help Preserve Wealth
As we celebrate Mother’s Day this year, government statistics show that single motherhood is becoming the new normal. A 2021 report from the U.S. Census Bureau finds single moms make up the majority of all single-parent families (80%).
Even dual-parent families may struggle to build and preserve wealth they can pass on to their heirs, but working single mothers face the added burden of pay parity, among other challenges. The 2022 County Health Rankings study showed that between 2016 and 2020, women needed to work an average of 185 days longer to earn the average annual salary of a white man.
While everyone’s personal financial situation is different, it is possible for single mothers to overcome the additional obstacles they face and build generational wealth. Here are five strategies single moms might consider to pursue their own financial independence and help their children:
#1 Get organized.
As the sole breadwinner for your household, you need a good grasp of your income, expenses, and outstanding debt before you can make a plan. Take a couple of months to track what you’re really spending versus what you’re making and identify opportunities to cut back as needed or desired. When you have a good understanding of your financial situation, you can begin creating a budget for you and your family. If you still find you have too much “month” at the end of your money, explore ways to create additional income, which could include finding a flexible side gig or starting your own business.
#2 Prepare for emergencies.
If you aren’t sure how you would cover an unexpected bill for $1,000, you aren’t alone. A recent study by Bankrate found that just 44% of Americans have an emergency fund for an unexpected expense. Instead of placing the expense on a high-interest credit card, consider setting aside a portion of your income each month in a high-yield savings or money-market account. These types of accounts are not only beneficial because your money earns interest, but they also enable quick access to your funds should you need them in an emergency.
#3 Review your insurance needs.
It’s not uncommon to lose access to health insurance in a divorce or after the death of a spouse, so if you find yourself without health insurance for yourself or your children, it’s time to explore your options. You may be eligible for insurance through your employer, a private broker, HealthCare.gov (which includes subsidies for eligible individuals), Medicare, Medicaid, or the Children’s Health Insurance Program (CHIP).
In addition to healthcare insurance, you may also want to consider life insurance as part of your estate plan, disability insurance for coverage if you were to become injured and unable to work, and long-term care insurance, should you find yourself in need of nursing home care for a permanent disability or illness.
#4 Create an estate plan.
While you may already have a will, healthcare proxy, and durable power of attorney in place, you may want to talk with an estate planning attorney to learn additional ways you can protect your children if you die or become incapacitated. An estate planning attorney may recommend setting up a trust to ensure your wealth transfers to your children according to your wishes and discuss any issues that could arise should your child’s other parent survive you.
#5 Get help to develop a comprehensive financial plan.
While these suggestions may help you get started on a more solid financial path, developing a comprehensive financial plan that incorporates investing, tax planning, business planning, education planning, and retirement planning can serve you well throughout your life and help ensure your children can benefit from your legacy. One place to start is by taking Savant’s Ideal Futures Health Assessment, a three-minute exercise that provides you with an objective, wide-ranging audit of your financial situation to help you prioritize where you need to focus first. After receiving your assessment, you can schedule an introductory call to learn more about Savant’s financial planning process and the benefits of working with a fee-only financial advisor.
Parenting itself can be complex, but single parents don’t need to go it alone. By taking strategic steps toward planning for the future, you can help yourself and your future generations thrive.