Being a single mother is a challenge in itself. Such mothers have to fulfill the roles of a mother as well as a father and strive to make ends meet not only on the emotional but also on the financial front. One of the toughest jobs in the world for a woman is to have the right balance between their job and their duties as a parent. This task is further made difficult when there is no emotional or financial support from their partner and a co-parent to share their anxieties and worries. In such scenarios, while the emotional needs of the children have to be prioritized, the financial needs of the family also cannot be ignored.
Given below are a few financial tips that can be followed by single mothers to secure the financial future for themselves and their families.
Points for effective financial planning for single mother
Savings are essential for every person. However, for a single mother, savings are never enough and there has to be systematic financial planning to ensure a smooth ride through all the emergencies in life.
- Having life insurance and health insurance
Life insurance and health insurance are essential for every person today. With the rising medical costs, health insurance is an effective way to manage any unforeseen expenses or planned procedures that can otherwise make a huge dent in the finances of a person. Life insurance while important for every person is crucial for a single mother. In any unfortunate event with the mother, life insurance will be a safety net for her children to secure their education and future.
- Creating a budget and adhering to it
Having a clear budget to chalk out all the expenses of the family is important to navigate through them smoothly. Even more so as a single mother, it is essential to have a clear budget that helps in curtailing unnecessary expenses and optimizing the resources that one has.
- Having a sound investment portfolio
Apart from streamlining the annual budget, a single mother will also need a robust investment portfolio that can increase her income and networth. The investments portfolio needs to have a good spread of long-term and short-term investments. It is equally important to manage the risk of investments so the portfolio will be able to provide good returns at manageable risk profiles. Some quality investment options that can be reviewed by single mothers include investment in PPF, NSC, balanced mutual funds, FDs, etc. Furthermore, it is also essential to have targeted investments that can help in children’s higher education or marriage.
- Having an emergency fund
Planning for an emergency is one of the first and foremost steps that need to be taken by any family, especially by a single mother. Such emergencies can be any like a job loss, temporary or permanent disability due to an accident, or loss of life. Such an emergency fund should be sufficient to fund the monthly expenses for at least 6 months. It is also important to ensure that the emergency fund is not used to fund other expenses and is saved only for contingencies.
- Making effective tax planning
Tax planning is an effective way of saving taxes at the same time creating sound investments. The Income Tax Act, 1961 provides many tax saving options in the form of tax deductions as well as tax exemptions that can be availed by single mothers to minimize their tax liability. Some of the common tax saving options include deductions under section 80C, deductions under section 80D towards health insurance, deductions on home loans principal and interest amount, deduction on education loan, exemption from capital gains provided they are invested in notified securities or purchase of another house, etc.
- Plan your retirement too
While planning for the financial security of one’s family is what a single mother strives for, it is essential to not forget their own future. At the time of retirement when the kids are settled in their lives, it is important to plan for such time so they are not financially dependent on their children. Therefore, it is equally crucial to start retirement planning as soon as possible if not already in place. Retirement planning should be such that the amount available either monthly or lump sum upon retirement should be sufficient to meet not only the basic needs but also enough to enjoy life in retirement and take care of any medical expenses or emergencies.
- Promote financial planning in kids too
Children learn the value of money and saving from their parents. When a child sees their single mother working hard and saving every penny for their bright future, it inculcates a sense of responsibility among the kids and makes them appreciate the need for effective financial planning. Children learn to understand the difference between their needs and desires and spend their available funds most efficient manner.
Conclusion
Managing the household and career without any support or a partner to depend on is quite difficult and also often the most unappreciative position. As the sole breadwinner, a single mother needs to evaluate the needs of the family and find ways to increase their family income to meet such growing needs. Therefore, in such cases, mere savings are not enough. A single mother needs to save, invest as well as spend smartly to optimize the available resources.
FAQs
Ideally the best answer to this is to start planning for retirement as soon as one starts earning. However, if not then it should definitely be started as early as possible to maximize the retirement corpus.
Yes. Single mothers are eligible for a deduction on a child’s education loan under section 80E.
As per most experts, a person should spend their income in the ratio of 50:30:20 where 50% is towards the needs of the family, 30% is towards splurges or leisurely expenses like vacations, and 20% is towards savings and investment.
To clear the past debts of the deceased husband, a single mother needs a clear plan of action or can also take professional advice for the same. It is important to know the finer details of the debts and the repayment structure as well as the benefits of foreclosing the same.
