Seven Financial Lessons for Single Mothers
Bringing up a child single-handedly is a daunting task, but you can achieve your goals with a well-devised plan
The joys of motherhood are often extolled, but the fact is that it can also be a draining experience thanks to the multi-tasking that comes with the territory. And if you are a single parent, child-rearing becomes even more arduous, emotionally as well as financially. Do not let emotional turmoil that comes with a divorce or spouse's death derail the future of your family.
Read on to learn how you can navigate your way through the tough times.
- Get a handle on your financial situation
While it is not easy to reconcile with the emotional loss, you need to work towards securing at least the money front by planning for all financial challenges. Once the legal and procedural paperwork is out of your way, start with taking stock of your current financial situation. "Many women do not actively participate in financial decisions, making them vulnerable," points out financial planner Bhakti Rasal. If you have stayed away from money matters altogether, it's time to learn the basics - paying various utility bills online, discharging EMIs, organising important documents, managing your investments and so on.
- Reassess your priorities
All plans that you made jointly with your husband will now have to re-evaluated. Next, set goals to which a newly-minted financial plan will have to be aligned. If you have received any money on separation or spouse's death, use it to lay the foundation for a financially sound future - pay off high cost loans and chalk out an asset allocation plan to meet short-term and long-term expenses. "If you are not employed, invest the lump-sum in such a way that it generates monthly income. You can also set aside a part of it as an emergency fund," says Rasal. Maintain a balance between saving and spending. "I have observed women who were too scared to use the insurance corpus to fund expenses as they feared requests for financial assistance from their in-laws or relatives. Similarly, resist the temptation to splurge the huge amount that you may receive. Post-trauma, human beings try to compensate emotional losses in this manner," she adds. You can also look at buying house if you do not own one. However, do not blindly 'invest' in a property, with the aim to sell it off to meet future needs. For one, you may not be able to liquidate them at will. Secondly, the opaqueness in property transaction can put your lifetime's savings at huge risk.
- Get adequate protection cover
You may have umpteen number of bills to take care of, but never push health insurance premium down the priority list.
"A lot of times single mothers tend to ignore their own well-being and health cover. Even those who have insurance do not have adequate cover. Most are content with a sum insured of Rs 2-3 lakh, when they should ideally buy a cover of at least Rs 10 lakh," points out financial planner Tejal Gandhi, CEO and founder, Money Matters. If you have dependent parents, you need to buy health covers for them too. She also recommends a minimum term life cover of Rs 1 crore to financially secure the child's future, as you are the primary breadwinner now.
- Do not be over-indulgent
Running a tight ship is the key to getting closer to your goals. Do not let expenses related to your child go out of hand. "A single mother typically wants to do more for the child to make up for the father's absence or limited presence and incur wasteful expenditure. They should resist the urge to indulge the child and redirect the money towards more productive purposes," cautions Gandhi.
- Avoid extreme risk aversion
It is natural that a single mother will tend to be extremely cautious while choosing financial instruments and opt for 'safe' and simple-to-understand fixed deposits or even traditional endowment life policies. "Gradually, she should learn to change the risk profile from conservative to moderate," recommends Gandhi. Invest time to understand equities and make space for equity mutual funds in your asset allocation. "Every woman must aim to be physically, emotionally and financially independent. Even if you have an advisor, educate yourself about investment options available and take charge of your finances," says Gandhi. Do not outsource money management to your relatives.
- Plan for your retirement
Single mothers tend to focus extensively on their child to the point of neglecting their requirements. Never lose sight of your retirement planning - your regular and child expenses notwithstanding, make sure you invest a fixed sum every month in public provident fund (PPF), National Pension System (NPS) or equity funds through the systematic investment plan (SIP) route.
- Do not ignore the here and now
The biggest challenge for single mothers is to juggle multiple roles, tasks and goals - managing work, home, household budget, children's health and education as well as their own retirement. Making allocation of savings towards each of these goals can be a tedious affair. Caught up in such mundane, laborious chores and constant future planning, single mothers unwittingly turn their backs on the present. "They often forget to live for the day. They should set aside a part of their savings for travel or any other hobbies they wish to pursue," says Gandhi. Do not allow the burden of responsibilities to weigh you down; create monthly savings bucket for each of your goals to take the pressure off you.