Important steps to overcome financial challenges as a single parent

Single parenting is becoming more common in the US as the percentage of single mothers, fathers, and other caregivers raising their children without a co-parent is increasing. In fact, according to reports, The United States has the highest percentage of children living in single-parent households in the world.

According to the latest research by Statistica, nearly 15.61 million children are living with single mothers, and about 3.57 million are living with single fathers as of 2021. The percentage of rising parenthood since 1970 can be linked to various factors, including changes in attitudes toward marriage and divorce.

With the rising numbers, there are various challenges that single-parent households face. One such is due to financial disparities as compared to two-parent families. The average salary of single-parent households is about $36,000 compared to two-family households, which is nearly $99,000.

Although average single parents face various financial difficulties, it is possible to overcome financial challenges with proper money management.

Create a budget

Budgeting is an essential factor in money management. It lets you know where your money is going and how much of it is. It can help you manage finances by eliminating excess expenses.

But there is more than one budgeting method which can make budgeting a bit confusing at first. For instance, you use the envelope method of budgeting, where you make an envelope for each of your expenses and fill them with the required amount so you don't overspend. James Anderson, CEO of Veritas Buyers said, “It's better if you make envelopes of cash for everything like groceries envelopes, health, and clothing etc.,”

Also, you have the 50/30/20 budget, dividing your after-tax income into three categories: 50% for necessities, 30% for what you want, and 20% for saving. Again, you have the zero-based budgeting method, where you account for every penny in your budget.

Understanding each budgeting method and adopting the one most suitable for you is crucial.

Get rid of your debt

As a single parent, the last thing you want is to be covered by debt. “Having less debt means that you have fewer expenses and more money to put toward your children,” said Luciano Colos, Founder & CEO, PitchGrade.

Borrowing may give you temporary relief but can threaten your financial stability. Debt prevents you from making the best use of your money, like saving for retirement or a rainy day. Thus, it is essential to know how to get out of debt.

If you have created a budget, you may already have figured out how much you owe in total and what are your scopes of savings to repay your debt. Depending on your situation, you may consider various debt relief programs and proceed with the one most suitable.

For instance, consider debt consolidation to help you manage your credit card debt or a debt management plan to make repaying your debt more manageable. Alternatively, consider a debt settlement program if you can't repay the entire debt amount but only a portion.

Create an emergency fund

An emergency fund is essential to cover days of uncertainty or despair. It is more important when you are a single parent to manage expenses for yourself and your child. Even when finances are tight, it is necessary to save enough and build a substantial emergency fund that will cover your monthly expenses for at least six months.

Various strategies can help you build an emergency fund. It creates a financial cushion protecting you and your child in a difficult situation like a layoff and enables you to get back on track.

Make use of tax benefits

As a single parent, you may qualify for several tax benefits. For instance, you are entitled to receive $2,000 per child if you qualify as a single parent for The Child Tax Credit. In addition, if you file as the head of household instead of a single filer, you may get a higher standard deduction.

You should also be eligible for the Child and Dependent Care Credit if you pay for childcare. And lastly, as an average-earning single parent, you are also suitable for the Earned Income Tax Credit.

You may claim the appropriate deductions and exemptions for each qualifying child as a single parent. Using these benefits gives you a better chance of protecting your finances and maximizing your savings.

Get insurance

As an average single parent, it may be challenging to get life insurance, given it is an additional expense from your monthly income. However, life insurance is equally important and should be noticed like any other insurance. You may be assured that after you, your kids may be well cared for by their other parent, your sister, or any other reliable family member. But there are various financial concerns to consider in your absence, like additional childcare or educational expenses.

Preferably, you should have sufficient life insurance to support your dependent children until they are 18. If it is challenging to afford that much, you may buy term insurance as much as possible and later increase it. For your child's future education, consider a coverage amount that will cover your child's tuition and other educational expenses if something happens to you.

Increase your income

In the current situation, managing a household with a single income is undeniably challenging. It is standard advice to diversify your income sources. Although working a second job as a single parent is not practical, it can be helpful to take up a side hustle for some additional income.

“There is a lot of online work that one can do. Time management is the key here,” said Laura Martinez, Consultant and Content Writer at PersonalityMax. Other options include taking up courses and earning certificates which can improve your skills at the current job position. This way, you have a higher chance of landing a promotion or a raise.

Final thoughts

With the numbers for single parenting subsequently increasing, it should not be noticed that being an average single parent comes with financial concerns and challenges. This is especially true since average single parents have to manage their household with a smaller budget than average dual parents. For example, making ends meet and saving for the future might feel too overwhelming or farfetched.

It will be helpful for single parents to make a monthly budget and stick to it to manage their finances better. In addition, keeping debt at bay or eliminating them can be helpful to reduce stress and increase savings in the long run.

Also, there are various tax benefits for single parents that can increase their monthly savings. And lastly, getting the proper insurance and building an emergency fund can create a financial cushion for the future.

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