eing a single parent is financially challenging. There is a high rate of single-parent families in North America, and surveys show that lone-parent families are at a higher risk of poverty. This is why having the right money management strategies is a must for lightening the financial load of single parents.
Learn Proper Budgeting
Unless you are in a circumstance where other parent is providing ongoing financial support, it’s likely that you’re a single-income household. As the sole earner of the family, you need to understand how to budget wisely and follow through with it.
The first step to budgeting for any goal is to write down your income and compare it to your expenses. This simple first step will clearly lay out your incoming out outgoing expenses giving you a accurate reflection of your financial situation. You layout should include mortgage payments or rent, childcare costs, food, utilities, and all your recurring expenses. If those two numbers (income and expenses) are very close or add up to a negative amount that means you’re not making enough money. Or, it can mean you’re spending too much and you need to cut back. You might have to look for a higher-paying job or find cost-cutting solutions, such as commuting or getting a job that provides free daycare services.
Regardless, budgeting and tracking your cash flow are key to understanding how much you need to earn every month in order to provide for your family and to save for your future.
Seek Child Support
Luckily for Canadians, child support is federally mandated. Even if the parents are separated, they are legally required to provide financial support to the children. This is calculated based on the parents’ income, number of children, residency arrangements, and the province they are located in. This can cover expenses such as childcare, healthcare, and even extracurricular activities.
Government Grants and Subsidies
Canada recognizes the challenge of being a lone parent and as a way to help, the government offers financial aids to families in need. One of these is the Canada Child Benefit (CCB), a tax-free monthly financial assistance to families with children aged 17 and below. For the year 2020-2021, the CCB’s maximum benefit will be $6,765 for every child under 6 and $5,708 for every child aged 6 to 17. These can significantly offset costs like groceries, clothing, and leisure activities for the children.
Another government plan that single parents should know is the registered education savings plan (RESP). A guide to RESPs outlines how they are tax-sheltered accounts designed specifically for putting away money to fund a child’s post-secondary education. For contributions under $2,500 made per year, the government will match 20%. This can provide families with a bigger incentive to save for their child’s education.
Have a Debt Repayment Plan
Paying off debts slowly but consistently is essential to any household. Credit cards and other unsecured or high-interest debts should be paid off first as it can significantly ease your financial burden as a lone parent. Another strategy is to consolidate your debt into a single loan, which can make it simpler to manage your overall expenses. There’s a possibility of reducing your interest rate as well as your monthly debt payment.
Build an Emergency Fund
An emergency fund is simply a cash reserve for unprecedented events, like job loss or a medical emergency. Every household should have one, not just single-parent families. Contrary to commonly cited advice, experts say it’s better to keep an emergency fund in a savings account than to have it in cash. Invest it in a registered retirement savings plan or a tax-free savings account. This is because they are retirement accounts where an emergency fund can grow significantly over time through compounding.
There’s no doubt that money management is one of the biggest challenges for single-parent households. However, the tips given above can help single parents ease their financial burden and secure a better future for their families.