Single mothers are faced with the unique challenge of managing both a family and their finances single handedly. While it can be incredibly daunting, there are so many benefits that come along with being able to run a successful single parent household. Before you know it, single mothers will be expertly organising every single aspect of their life and finances, making them superwomen in their own right. By taking small steps at first, single mothers can acquire the necessary skills and develop important habits like budgeting and investing ensuring financial success for them and their families in the future.
The trials and tribulations of single mothers
The United Nations estimates that there are over 100 million single mothers all over the world. Not only does research reveal that womens' earning power is significantly reduced as a result, but that raising children alone can have a detrimental impact on the mental health of women. It's really no surprise when the median income for families led by a single mother in 2020 was about $49,214, well below the $101,517 median for married couples. That's half the amount of money!
So yes, it's completely fair for single mums to feel the weight of bringing up a child alone, as the financial burden is no longer spread across two people. But the good news is, there are are a series of money moves single mums can make to empower their financial future and create a life for the children. It really is possible if you follow these crucial steps.
Managing the finances of a single mother household, with the pressure and uncertainty this can bring, is no small feat. From ensuring bills are paid on time to making sure there are enough funds for extracurriculars and other expenses, it is essential that single mothers ensure all their paperwork is organised so planning and preparing for financial stability can be made as easy as possible.
Clear and concise documentation of income and expenses can go a long way to help single mums reach their goals. By setting up a system of filing, setting deadlines for bill payments and finding smart ways to budget, this level of organisation is transformational. Single mothers will feel more at ease when it comes to managing tomorrow's tasks instead of worrying about yesterday's paperwork.
Single mothers should consider updating their document. If you have an ex who used to be listed as a beneficiary for any of your accounts, it’s time to update these to keep them out of the picture.
Minors can’t inherit property directly, so speak with a lawyer or estate planning professional if you need help in this area. Don’t neglect legal paperwork - make sure your will and power of attorney are up to date. With these essential steps taken care of, you can rest assured that the financial future for you and your children is set.
Review income and outgoings
One of the most important responsibilities single mums have is to review their income and outgoings. By conducting a review, single mums can ensure that their financial resources – both incoming and outgoing – are organised in a manner that works for them. It's a time-consuming task, but it's also absolutely necessary for single mums as it can provide peace of mind and help them prioritise spending on items that matter.
Create a spreadsheet that tracks all your income and outgoings. This will give you a good idea if there are any outgoings that you can cut, and how much money you have left at the end of the month.
Set up a budget
As a single mum, setting up a budget can seem overwhelming - but it doesn't have to be. By tracking income and expenses, you’ll get a better picture of where your money is going each month. Once you know this, you can create an affordable budget that works for you.
Turning to an emergency fund can feel like a lifesaver - so build one.
Allocating a reasonable amount to necessary expenses like rent or mortgage payments, utilities bills, childcare or school fees will help ensure that your future financial obligations are manageable. And by planning for the expected and unexpected costs life throws at us all, you can make sure that budgeting is something that serves your overall wellbeing in everything from emergency savings to family vacations.
Pay off high-interest debt
If you have debt, firstly it’s okay - many of us either have debt or have experienced it. The important thing is to take control of it and create a plan to repay it. So if there's one thing you should prioritise, it's paying off high-interest debt (in other words, debt with an interest rate of 10% or more).
There are two key ways to approach this, using the snowball or avalanche method. If you are paying more than 10% interest on any of your debts, try to knock that out first. Having smaller single payments throughout the month might help in terms of budgeting, but it will cost you more in the long run due to interest charges. Find a way to save money and put that extra towards your high-interest debt - even little steps add up!
Build an emergency fund
Single mums all know that having the ability to turn to an emergency fund can feel like a lifesaver! Creating an emergency fund gives you one less thing to worry about in times of financial hardship – whether it’s replacing your washing machine or just covering your bills during a period of unemployment.
We suggest single mums should aim to have at least three to six months worth of expenditures set aside as cash. This may seem like a lot but you won’t regret having the security of a backup when you need it most.
With this extra responsibility comes the importance of being prepared for the worst-case scenario – like what happens if something were to happen to us? Life cover is an important part of this, as it provides single mums with peace of mind that if something were to happen and you weren’t here or unable to work, your children would be okay.
Life insurance ensures that your loved ones receive an income in the event of an unforeseen tragedy, safeguarding them financially for the future. It’s worth getting yourself sorted now – because life changes can happen anytime.
Set financial goals
As single mums, it's important to set goals that can bring you and your tiny humans closer to financial freedom. By focusing on the meaningful objectives you want to achieve, you'll be able to devise a plan that will help make those dreams a reality.
Goals should be achievable but challenging and should put into action the necessary steps that will lead to the desired result. Investing in yourself and taking calculated risks are just some of the ways single mums can take advantage of setting goals, while creating a better future for yourself and your families.
Plan for retirement
As a single mum, it can be hard to find time for yourself and think about your future. However, with retirement on the horizon, it is important to get organised now. Start by sketching out a plan of the lifestyle you would like to have in retirement and your best estimate of when you might want to retire. This will give you an idea of how much money you need to save for your pension.
If possible, try setting aside a small portion of your income each month towards your retirement and invest it in a fund that suits your needs so that you're not lying in bed at night worrying about your own financial future.
Pass down good money habits
We have all heard "you're so like your mum" or "you're so like your dad", and predictably we pick up many of our parents’ habits. By teaching your children, when they're young, how to manage money and build wealth, you set them up for life.
As a single mother, you have the chance teach them how to budget, save and obtain wealth throughout their life can give them an advantage that will follow them into adulthood. It is essential we ensure our daughters understand not just the transactional side of money but also its potential as a tool - they should understand how money can create more choices in life, over and above making responsible decisions.
If you’re a single mother, it’s especially important to have healthy money habits for both yourself and your children. The good news is that by following a few basic tips, you can set yourself (and your kids) up for financial success. So get started on budgeting, organising your paperwork, getting life insurance, preparing for retirement and everything thing else we've suggested in this article for you. You have the power to change your financial landscape and to walk the path towards financial freedom.