Single-parent households face issues due to the restriction of not being able to have two earners in the family, as well as the need for one person to manage work, household, and child-raising tasks. Being a single parent is a big task, financially and otherwise.
Getting your budget under control, analyzing where your money is going and how it’s spent enables you to prioritize and eradicate unnecessary expenses and focus on what’s important. You must plan your finances accurately to reduce or eliminate mistakes for a fulfilling future, which only requires a credible financial plan accompanied by tax-saving investments.
Here are a few tips for single parents for proper financial planning:
Parenting isn’t easy and being wholly responsible for everything related to your child is even harder. As a single parent, you must manage the budget right. The best way of doing it is by improving your money-tracking skills. Make sure you do not indulge in unnecessary shopping and only buy things that you require to gain a clear perspective on your monthly spending. It might be a time-consuming task, and you might have to maintain a diary for record-keeping. This activity of noting down all your expenses can prove to be beneficial, especially at the end of the month.
Planning your investments well ensures that you keep good cash flow. Since you must achieve your goals on a single income, you must invest in tax-saving investments to grow your wealth over time. Your investment portfolio should have the right combination of conservative, balanced and aggressive investment options. Along with wealth creation, you need insurance to have a financial backup in times of crisis, that also gives you term insurance tax benefits under section 80C, 80D of the IT act. Life insurance is a safety net that protects your loved ones if something were to happen to you. Reputable insurers such as Max Life Insurance offers ULIP plans, which provide a dual benefit of both insurance and investment. Also, policyholders get term insurance tax benefits under Section 80D of the Income Tax Act.
Make sure you invest based on your risk appetite and preferences. Other tax-saving investments include ELSS (Equity Linked Saving Scheme), ULIP (Unit Linked Insurance Plan), NPS (National Pension Scheme), PPF (Public Provident Fund) and SSY (Sukanya Samriddhi Yojana).
Plan your child’s future
As a single parent, you worry more about your children and think of what will happen to them after your demise. Providing your children with the best education that you can afford is the first step in shaping their future. Be wise enough to foresee adverse events such as an illness or even your untimely death that could affect your child’s future and plan accordingly. Make sure you have insurance coverage with enough sum-assured under which your child receives benefits in case of your untimely demise. You can also avail of term insurance tax benefits after policy purchase.
It is crucial to invest in child plans before it’s too late as monthly savings will not be enough for the future costs. You can invest in child insurance plans according to your child’s education needs, your current financial status, and other monetary goals. The right policy provides your child with financial security when you are no longer around. Child plans are also tax-saving investments as you can get tax deductions on your premiums.
As a single parent, you must have confidence in your decisions and prepare well for the future, which offers challenges in every step. Everybody wants to do as much as possible for their kids, and often end up forgetting about their own well-being. Establishing financial security is also a means of taking care of yourself so that the burden does not affect your children in the future.