Broker Check
Financial Planning for Single Parents

Financial Planning for Single Parents

March 18, 2024

Whether you've recently become a single parent by choice or by circumstances, you may find yourself stressed about making ends meet on a single income. Fortunately, with a strong support system and some careful planning, single parents can not only survive, but thrive.

Around 25 percent of all households in the U.S. are led by a single parent.1 Read on for three key facets of financial planning for single parents.

Create a Realistic Budget

Adjusting to a new income and a new household budget can be tough. Whether you're starting from scratch or revising your current budget, the sooner you have a handle on your income and expenses, the better position you'll likely be in to make future plans. Some people find it helpful to track their spending for a week or two to see where their money is going, while others prefer to set out budget limits for categories right off the bat.

There are a number of free budgeting programs and apps available, or you can take the old-fashioned approach: pen and paper. If you're finding it tough to rein in your spending while using plastic, consider adopting the "envelope method"—write the name of the budget category (like food, housing, or entertainment) on the outside of an envelope, place the budgeted amount inside, and spend only from that envelope. Once the envelope is empty, you must refrain from further spending in that category until it's replenished the following month.[1]

Develop (or Update) Your Estate Plan

If you don't already have a will or other estate plan in place (and in writing), it's a good idea to draft one. A will doesn't just dispose of your assets upon your death, but can also include guardianship provisions for your child, which can be vitally important if you're single.[2] Your will should also make things easier for your next of kin by listing life insurance policies and any retirement policies you have in place; just remember that the plan itself will name any beneficiaries—the will itself cannot change any life insurance plans.[3]

A will doesn't need to be expensive or complicated to be effective[4]—resist the temptation to put this task off until you have more disposable income.

Make Sure You're Adequately Insured

In addition to health insurance, single parents should have life insurance.[5] This will help cover funeral costs, estate administration expenses, and help provide financial support for your child or children after your death.[6] If you're uncomfortable at the thought of these funds going to your ex-spouse or your child's other parent, you can name an alternative beneficiary or set up a trust on your child's behalf, make the insurance policy payable to the trust, and name a trusted friend, loved one, or even your attorney as trustee.[7]

It's also a good idea to have disability insurance. Although few young parents will ever "use" a life insurance policy, around one in every four U.S. adults suffers from a disability that can prevent them from holding down full-time employment.As a single parent, an uninsured work-ending disability can be catastrophic for your budget and your financial future.[8] A disability insurance policy can keep the bills paid while you recuperate or pursue long term disability benefits through Social Security.[9] Term life insurance and short- and long-term disability policies can often be offered through one's workplace, or bought separately.[10]

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

The insurance content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

https://comparecamp.com/single-parent-statistics/

https://www.cdc.gov/media/releases/2018/p0816-disability.html

[1] https://www.marcus.com/us/en/resources/personal-finance/the-envelope-budgeting-system-explained-and-how-to-use-it-in-the-digital-age

[2] https://www.legalzoom.com/articles/establishing-guardianship-in-a-will

[3] https://www.policygenius.com/retirement/how-life-insurance-works-with-wills-and-trusts/

[4] https://www.alllaw.com/articles/nolo/wills-trusts/how-to-read-will.html

[5] https://www.nerdwallet.com/article/insurance/single-parents-guide-life-insurance

[6] https://www.aigdirect.com/about-life/why-life-insurance/life-insurance-for-single-parents

[7] https://forrestfirm.com/blog/protecting-your-childrens-inheritance-after-your-divorce/

[8] https://www.johnhancock.com/ideas-insights/single-parents-guide-finances-insurance.html

[9] https://www.usa.gov/disability-benefits-insurance

[10] https://havenlife.com/blog/disability-insurance-open-enrollment/

Content Provider: WriterAccess

LPL Tracking 01-05095409