Q: I’m a single parent. Do you have any financial tips?
A: Review this checklist to help make sure you’re on the right track.
Set up a budget and recalibrate as necessary.
The most important part of managing a budget is to check in with yourself at regular intervals to adjust what’s not working.
Build up your emergency fund.
Everyone’s emergency fund will look differently, but experts recommend saving enough to cover 3 to 6 months of living expenses. The amount you need depends on your essential monthly expenses, such as housing, food, healthcare, childcare and transportation.
Check your health insurance plan.
A life event like a divorce or having a child enables you to make changes to your employer-sponsored health insurance plans without waiting for open enrollment. If you’re coparenting, have a conversation with the other parent to determine which one of your health insurance policies has more comprehensive or cost-effective coverage for the children.
Revisit your estate plan.
Think about estate planning documents as future protection for your children in the case you’re no longer here. A will is the first of these documents. It allows you to appoint a guardian for your children and dictate how your assets will be distributed after your passing. A living trust, or revocable trust, can also hold your assets until it’s time to distribute them according to your wishes.
Take advantage of relevant tax allowances.
Typically, the parent who cares for the child the majority of the time is the one who can claim them as a dependent. Determine what the federal child tax credit is – also, some states have additional child tax credits. There’s also the child and dependent care credit, which allows you to claim childcare expenses for children age 12 and under.
Save for your kids’ future.
One gift you can give your children is a solid start to adulthood in the form of a college savings. Commonly referred to as a “college fund,” a 529 plan is a tax-advantaged, state-sponsored savings plan used for educational expenses. Earnings in 529 plans are not subject to federal tax and in most cases state tax, as long as you use withdrawals for eligible education expenses, such as tuition, room, and board.
Don’t forget yourself.
It may not feel like a priority to save for your own future when your focus is on raising your children, but it’s still important to set aside funds for your retirement. Take advantage of tax-efficient accounts, like a traditional IRA, Roth IRA or a retirement plan available through your employer.
Being a single parent can feel overwhelming at times. But finances shouldn’t have to add to the pressure. Get guidance from an advisor who can help you focus on your priorities.