Single moms in the United States face a myriad of financial challenges that can be daunting even for those who are high earners. Juggling the roles of breadwinner, caregiver, and household manager often leaves little time and energy for managing finances effectively.
As a financial coach, below are 5 financial wellness challenges I observe single mothers struggle with, and four practical tips to help overcome these challenges.
Working With Significantly Reduced Disposable Income
Single moms often have one income source, which means less disposable income, even for high-earning single moms. This limits single moms' opportunities to save, plan for retirement, and spend on activities or experiences that benefit their overall well-being.
Childcare Cost Is a Significant Percentage of Income
Quality childcare can be expensive, and although all parents deal with the high cost of childcare, single moms need to allocate a significant portion of their income to cover these costs. Even high-earning single mothers may feel the financial strain, especially if they have multiple children.
Lack of Time to Prioritize Financial Wellness
Balancing work with parenting responsibilities can leave little time for financial planning. Single moms may struggle to find the time to create and maintain a budget, review investments, or plan for retirement. They might also find it harder to find the time to work with the financial professionals they need because of inconvenient hours.
Single moms often prioritize financial security, which can lead to risk aversion when it comes to taking risks that could improve their finances such as seeking better paying jobs or investing. While this cautious approach might feel necessary for maintaining stability, it limits their potential to take advantage of opportunities that could lead to a much needed financial boost.
Estate Planning Concerns
Ensuring the financial well-being of their children in the event of their own incapacity or passing is a top concern for single mothers, but estate planning, can be complex and costly. This results in an additional mental burden single moms have to face.
Four Tips to Overcome Financial Wellness Challenges
Keep Financial Planning Simple But Effective
Financial planning is important, but it doesn't have to be costly and time consuming. Focusing on the basics, and doing them well, can be an effective strategy.
Simplify and Prioritize Your Budget: As a single mom, you likely have limited time for detailed financial tracking. Simplify your budget by categorizing expenses into essentials (e.g., housing, utilities, groceries) and non-essentials (e.g., dining out, entertainment). Focus on ensuring essentials are covered.
Automate Payments: Set up automatic bill payments for essential expenses to avoid late fees and missed payments. This reduces the administrative burden and ensures your financial obligations are met on time.
Ensure you have adequate insurance coverage, including life insurance and disability insurance, to protect your family's financial future in case of unforeseen events.
Network and Support to Enhance Resources
Connect with other single parents to share experiences, advice, and resources. Support groups and online communities can provide valuable insights. These groups can point to the specific help you need, whether it is government programs that offer financial assistance or local community resources in the form of free or reduced childcare cost.
Build An Above Average Emergency Fund for Peace of Mind
As a single mom you have competing financial priorities, but prioritizing an adequately funded emergency fund is critical.
Aim for six to twelve months of monthly expenses to adequately fund your emergency fund.
You can start small. If you can't save a significant amount initially, don't be discouraged. Start with small, regular contributions to your emergency fund.
Whenever you receive unexpected money, such as tax refunds or bonuses, consider directing a portion of it into your emergency fund. This helps accelerate your savings.
Find the Right Balance Between Stability and Growth Opportunities
It's understandable that single moms can be more risk averse because they prioritize stability, but it's important to find the right balance between maintaining some stability and taking measured risks.
Work with a financial professional who is flexible, understands your unique concerns, and can help you develop strategies that align with your financial goals and risk tolerance.
Maintain job stability but expand and enhance your skills in your field so that you can take advantage of opportunities to earn more without feeling like you are taking a big risk.
Being a single mom presents unique financial wellness challenges, but applying these strategies can help reduce your financial anxiety and elevate your financial wellness.