Financial well-being for single mothers has been on top of the priority list for far too long. Millions still rely on their family members or are experiencing financial urgency for the first time, especially after the challenges posed by the global pandemic. The worries of single mothers vary owing to the multitude of responsibilities they juggle on a daily basis, yet there’s one crucial issue that unifies them all – economic independence.
As a result of circumstances, being a single mother is a challenge and they do undergo financial stress especially if they are not financially and legally aware. Due to the pandemic, experiencing everything from pay cut, job loss to increased household and child and family care responsibilities and expenses has hit single moms even harder. However, having a grip on your finances, budgeting and keeping a tab on your earnings and spending can make the journey a lot smoother.
Here are a few financial planning tips to ensure financial security during these unprecedented times:
Know Your Needs
This is extremely important and simple when you estimate your needs and map them against a particular period. In the ever-evolving world, individual needs change rapidly in different stages of our lives. The level of income and expenses keep changing and that’s the reason why it is important to estimate your needs and then plan investments accordingly. Goals-based investing has shown to be a successful, long-term investment strategy.
Be Financially Independent
Learn any skill of your liking or get employed and keep upskilling so that you are not dependent on any other relative for your financial needs. This gives you confidence in yourself and your children – who will always look up to you for inspiration. With the pandemic, we have seen old jobs getting redundant which need to be redesigned, or look for different opportunities to earn a living.
Save Out Of Your Income
Make it a goal to save even a small portion of your income so that you can create a long-term investment portfolio for yourself/your family. For this, it is important to only spend on the essentials for some years, so that you can build a corpus.
Invest For Yourself
You are the most important person in any equation; put yourself first and put some money aside for your post-retirement years/emergency
Your kids see you as a superhero who is always there to save the day and that is exactly who you are. You are the one who takes care of them, keeps them safe and provides everything they need at the time they want. Term insurance is a single mom’s best friend. It is the most affordable and sensible way to ensure your children’s future in the case of any unfortunate event especially in view of the current pandemic. The best time to buy a term policy is at a younger age, when premium rates are low, and one can get insured for a longer period of time.
Get A Health Insurance Plan
Make sure that you have basic health insurance which covers the family as well as yourself. Any hospitalization can set you back by a big amount which may not be easily recoverable, if not insured.
Build A Budget For Emergency Fund
As the sole breadwinner, mothers have a lot of responsibility resting on their shoulders. While careful budgeting can help make the most of your income, there are still unexpected expenses that can pop up. Building a budget for an emergency fund will help you cope with these events without turning to your credit cards or risky payday loans. This Fund can be invested in Bank Fixed Deposit which is liquid.
Prioritize Retirement Savings
A crucial piece of financial advice for single mothers is to save for retirement. The longer you wait the more money you will need to save to have a secure retirement, thus your early working years are critical to your retirement savings goals. The earlier you start contributing, the better it is as the value of compounding will help the corpus grow. You can subscribe to the New Pension Scheme in which you can contribute money every year and at the time of retirement, the corpus is converted into an annuity.
Investment for Daughters
You can also use Sukanya Samriddhi Yojana for your girl child/children for long-term investments. These have tax breaks too.
Benefits of a PPF
Public Provident Fund (PPF) is also a safe long-term investment that should be utilized and the earlier you begin, the better will be the returns.
Invest In SIPs
Systematic Investment Plans (SIPs) for investment in Equity ULIPs of insurance companies or Mutual Funds – Equity Schemes will help investment grow while hedging for inflation
Best Timing For A Home Loan
If you are looking to buy a home – now is the time! Currently, the interest rates are the cheapest they’ve been in the past 25 years and also property prices have corrected due to low demand and the pandemic. There are a number of housing loans available for women at a cheaper interest rate. Additionally, the Pradhan Mantri Awas Yojana gives a subsidy on interest payment.
A Penny Saved Is A Penny Earned
If you are a tenant, you could look to negotiate your rental contract since rentals have decreased. Most tenants have vacated and are working from their hometowns - thanks to the internet/work from home policies adopted by corporates. This will help in increased savings. Other ways of increasing savings can then be used for investing and making your money work for you.
Being a single mother and figuring out financial security for yourself and your children is not always easy but financial discipline, planning and investing wisely can make life a lot easier.
The author, Dr. Poonam Tandon, is Chief Investment Officer at IndiaFirst Life. The views expressed are personal