Financial tips for single parents

Being a single parent is like playing parenthood on hard mode.

Everything is up to you – from teaching them how to ride a bike to instilling good morals, and all the simple things in between such as getting them to school on time and ensuring they brush their teeth twice a day. We love our kids, but there’s no denying it’s a tough gig.

And one of the hardest parts of being a single parent are the financial challenges. Almost one in five New Zealand single parents say they do not have enough money for their everyday needs, compared with a little over one in 20 partnered parents.

With money being tight, it’s always worth exploring new ways to manage your finances. Here are our best financial tips for single parents.

Start budgeting

If you’ve never made a budget before, this is a great way to get a better idea of where your money is going every month, and even help you to set some aside.

Start by writing down how much you make each month after tax, and include any money you receive from child support payments. Then, write down all of your monthly expenses, including rent/mortgage, childcare, food costs, credit card payments, power bills, transport, and insurance payments.

How much is left?

Consider splitting the leftovers into three categories – one for making extra payments to any debt you have, one for setting aside for savings, and one for fun. Even if each of those categories are just $20 per month, it will still add up over time.

If you are spending more than you are earning, this is your time to consider all the things you are spending money on, and see if you can cut down on costs, or even seek a way to increase your income such as a second job, a new job or even selling unused items.

Set aside emergency funds

Emergency funds are important for anyone, especially so for single parents who can’t lean on their partner should an emergency expense pop up.

This could be anything from needing a whole new set of tyres to pass your Warrant of Fitness to needing to pay for your child’s braces.

That’s why it can be important to try to set some money aside with each payday – even if it’s only a small amount – as it will add up and could offer a welcome relief in times when you need it most.

However, be sure to only use this fund for emergencies. If it’s something you can save up for or isn’t necessary right now, it isn’t an emergency.

Seek financial help options from government grants

The good news is that there is help at hand for eligible single parents. There are numerous assistance programmes available, and you can speak to Work and Income or a budget advisor to help you find the best ones for your specific circumstances.

For example, the Sole Parent Support benefit is available for single parents or caregivers with one or more dependent children under the age of 14. It is designed to offer sole parents support with a weekly payment, and helps those parents find part-time work or prepares them for future work.

The Childcare Subsidy helps sole parents pay for children under the age of five to go to pre-school or other childcare services, while the Accommodation Supplement can assist low-income earners with paying for rent, board, or home ownership costs.

Be sure to investigate how you can make the most of any government assistance available to you, as it can make all the difference. You can explore a full list of assistance programmes available here.

Explore investment options

When you’re juggling financial issues, the last thing on your mind is probably investment options, but considering them may help you in the long term.

The first step is always to speak to a financial advisor, who can take your situation and goals into account and help guide you through the different options, and suggest the best route for your needs and goals.

They might suggest investing with your bank, such as with a term deposit or a high-interest savings account. A term deposit can offer a guaranteed return that you will receive on a certain date, whereas a savings account can offer a small sum in interest each month (but without locking your money away like a term deposit does).

Your advisor might also talk to you about investing in stocks, bonds, options, or mutual funds, each of which comes with their own level of risk and their own pros and cons.

Pay off debt

Many of us have debt. Roughly two out of five Kiwis (41%) have an outstanding credit card balance, and that’s not counting student debt, hire purchase, and mortgages. This can cost in the end with interest rates and payments.

If you have debt, consider ways to pay it off sooner to help minimise the amount of interest you pay. This could mean cutting back in other areas, picking up the occasional extra shift at work, or even selling off items or clothing you don’t use anymore.

You might also look into finding a lender with better rates for your debt or if you have multiple debts you may consider consolidating them to reduce payments and interest charged. Or perhaps consider moving your debt to a lender that offers an interest-free period, so you can spend that time paying off your debt without adding interest to the loan.

Be sure to shop around for lending just as you would shop around for a new car to ensure you get the best deal (and pay the least amount of interest possible).

Plan for the worst, hope for the best

Finally, it doesn’t hurt to make a plan for the worst-case scenario. Consider if something happens to you, who will look after the kids and how can you assist them even after you are gone.

Considering a life insurance policy may be one way. This means that in the worst-case scenario, your family could be paid a lump-sum payout should you pass away or you could receive a payout should you become terminally ill. This money can be used for anything from funeral costs to paying for bills and expenses when you no longer have your usual income.    

At the same time, it’s a good idea to draw up a will. You might want your savings and assets to go to your kids, but you will also need someone to administer those wishes – that’s why it’s so important to make plans (even though it’s all just in case).

As always, be sure to seek your own advice from a professional for more personalised assistance to suit your needs and goals.

This article is an opinion only, provided for general information purposes and shouldn’t be considered or relied upon as professional or personal advice. If you have legal, tax, or financial questions, you should contact an appropriate professional.