The single mother’s guide to financial planning

As sole breadwinners responsible for the welfare of minor children, single mothers face a particularly daunting set of challenges when it comes to financial planning. Besides not having a partner’s income as a safety net, the emotional strain of shouldering the family’s finances alone can leave many single mothers feeling overburdened and financially strained.

However, single mothers have a special type of resilience and resourcefulness when it comes to managing their finances. Research shows that women make better investors because they are more likely to seek advice, stick to their financial plans, and remain composed in times of market volatility. With these inherent advantages in mind, there are some concrete steps that single mothers can take to fortify their financial positions.

Budgeting and money management

Running a single income household, single mothers know and understand the importance of careful budgeting. With only one person generating an income and managing outflows, budgeting for a single mother is easier to centralize and manage. Many single parents find it easier to manage their finances through a single financial institution using a range of account types to meet their objectives, such as a transactional account, credit card, and savings account earmarked for emergency funds.

Estate planning

Regardless of your net worth, having a valid Will and an appropriate structured estate plan is essential. If your child’s other parent is still alive at the time of your death, that parent will be your child’s guardian. However, if you are the child’s only surviving parent, it is imperative that you nominate a legal guardian for your minor child in terms of your will. Your child’s nominated guardian will be responsible for the day-to-day care and decision-making with regard to your child if you are no longer around, so it is important to give careful consideration to this appointment.

If your intention is to leave the proceeds of your life policy to your minor child, you may nominate the testamentary trust as the beneficiary on the life policy so that, in the event of your death, the proceeds will be paid directly into the trust and will not attract estate duty.

Saving and investing

Having an easily accessible and appropriately sized emergency fund is a financial planning necessity for any single mom, although setting one up can be challenging when faced with the costs of raising children. If you’re dependent on maintenance income from your child’s other parent in order to meet your monthly living costs, be sure to build a buffer into your emergency fund in case of late payment or defaulted maintenance payment. Approaching the maintenance courts for relief is time-consuming and subject to frustrating delays and postponements, so budget for a worst-case scenario when putting your emergency fund in place.

While your natural instinct may be to put your own retirement funding on hold so as to prioritize your child’s education funding, be careful of taking this approach. Remember, while it may be possible to borrow for your child’s tertiary education, it’s not possible to borrow for your retirement. While you are raising minor children, you may be somewhat limited in what you can set aside for retirement, but it’s important to at least start the process – keeping in mind that as your children grow older and become financially independent, you can start ramping up your retirement savings. In the interim, however, finding a balance between funding for your retirement and putting some money aside for your child’s education is key.

Medical aid cover

Medical aid is an expensive line item in any budget and, because medical inflation continually outstrips consumer inflation, medical aid premiums can become a proportionately bigger monthly expense, especially if your salary is not keeping pace with inflation. At the very minimum, ensure that you and your child remain registered on a basic hospital plan, bearing in mind that the network options are generally more affordable, and ensure that you do not have any break in your membership.

Ideally, spend time consulting with a Financial Advisor who can source a medical aid and plan option that is most appropriate for your family’s needs, taking into account any pre-existing conditions or ailments that you or your child suffer from. Some medical aids offer excellent condition-specific treatment programmes for illnesses such as diabetes and asthma, and it sometimes makes more financial sense to move onto a more comprehensive option to take advantage of these benefits.

Financial success starts with good saving habits. Our Financial Experts have been unpacking and providing practical advice on the best ways to preserve YOUR financial freedom. Contact our Financial Advisors to ensure that you are receiving Shariah-Compliant Finance advice.

Anglowealth is an Authorized Financial Service Provider (FSP Number: 46755)

Source: (Moneyweb, 2022)

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