The U.S. Department of Agriculture reports that it costs approximately $241,080 for a middle-income couple to raise a child to age 18. Many single parents have that responsibility alone. Even with child support, it’s smart to plan ahead financially as a single mom or dad.
First of all, consider your estate planning. It’s essential to make arrangements for your children if you become unable to care for them. Draw up a will, name a guardian for your children, and a “power of attorney,” giving someone the legal right to make decisions on your behalf.
Next, consider setting up a trust, where your assets can be held via a trustee for your children. Also, ask your employer about disability benefits. Generally, you receive a smaller income when you claim disability. But even partial income is vital for single parents who don’t have another income to cover a gap.
Taking out a life insurance policy is equally important. The policy you purchase depends on your finances. A term policy is most economical because it offers a straightforward death benefit.
Health insurance is also essential because if you’re uninsured, a serious medical event can be financially crippling. Comparison-shop for policies at your state’s marketplace or at HealthCare.gov.
Finally, don’t forget about tax breaks! Single parents can file as head of household. You’ll pay less and claim a higher standard deduction. You can also claim exemptions for yourself and each qualifying child. You also might qualify for the earned income tax credit, the child and dependent care credit, and the child tax credit.
Here are a few more tips for daily financial decisions:
1.) Credit cards
While credit cards may seem like a solution for filling the gap created by a second income, they’re also an easy way to a life of debt.
It’s tough for single parents. While retail therapy may be tempting, the added debt will make you feel worse. Therefore, plan all shopping carefully and avoid impulse purchases.
Guilt causes many single parents to spoil their children, even when they can’t afford it. This is especially true during the holidays and for birthdays. Hence, set a limit for gifts, and stay within your budget.
4.) Ask for Help
Check with United Texas CU for financial advice. There are also many non-profit organizations with programs for single parents.
Emergencies happen. Whatever your income, it’s important to have a safety net. Put aside money from each paycheck to set up an emergency fund for unexpected expenses.
Your Turn: Have you faced some of these questions as a single parent? What were the most useful solutions you found?
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