Being a single mom comes with a lot of challenges, and managing your finances can be one of the big ones. But it doesn't have to be. Try these five money moves to help you secure the financial life you want—from budgeting and saving to preparing for the unexpected.
1. Open a Savings Account
One of the most basic but important things you can do to manage your money well is to ensure you have a safe place to put it. Ideally, you should have at least two types of accounts: a checking account and a savings account.
A checking account is typically used for day-to-day needs, bill payments and recurring transactions like groceries, gas and rent or mortgage payments. On the other hand, a savings account is for longer-term needs and goals, and money you won't need right away. It's a place to keep your emergency fund to cover unexpected costs, set aside money for one-time payments like an annual insurance bill, or build funds for a summer vacation, for example.
There are many options for opening a savings account. You may want a traditional savings account at the bank where you have your checking account. This allows you to easily transfer money back and forth between accounts. To earn more on your savings, however, a high-yield savings account, usually with an online bank, is a good option and can grow your money at a much faster rate than a traditional account.
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2. Make Your Savings Automatic
It's no secret that raising children on your own can take a lot of time and energy, so the more you can do to streamline your life, the better. That's where automating your savings comes into play: Set up your checking account to automatically transfer a specific amount of money to your savings account (or accounts) every time you get paid.
Research shows when you put your savings on autopilot, you're much more likely to meet your money goals. This is because you don't have to decide whether—and how much—to save each time you get paid. Automating your savings is one of the easiest ways to build a good habit that protects your future without actually having to do a lot.
Note: If you have an irregular income, "setting and forgetting" your savings can be more challenging, but it's still essential to establish a system for saving some of your money. This could mean you transfer money less often or set your account to transfer money only when your account hits a certain threshold.
3. Do a Debt Checkup
Another money move that can help you get control of your finances is to do a debt checkup. A debt checkup is when you take stock of how much money you owe and create a plan for paying it off.
It might not be the most fun thing you do, but seeing all your debts in one place is crucial because it provides a snapshot of your financial picture. With the complete picture in view, you'll be able to set realistic and achievable goals for repayment.
Here are steps you can take to do a debt checkup:
- Know what you owe. Gather all the details about your debts, such as credit cards, a car loan, personal loans, student loans and any other money that must be repaid. Don't judge yourself here; think of it as collecting information. Checking your credit report for free is a quick way to see your debt accounts and how much you owe on each.
- Set up a monthly budget. Creating a budget helps you see how much of your income goes to necessary expenses, like rent and utilities, and optional ones, like eating out and entertainment. Setting a budget that keeps expenses lower than your income—and sticking to it—is a key step to financial security. Dedicate a part of your budget to debt payment, and pay whatever you can afford each month to bring down your balances.
- Prioritize high-interest debt. Pay off these debts as quickly as possible to reduce the amount you're paying in interest. If you're having a hard time managing several accounts, consider consolidating multiple debts into one loan with a lower interest rate to make them easier to manage and save on interest.
- Get help from a credit counselor. If you're feeling overwhelmed by debt, a credit counselor may be able to help. They can meet with you to go over your finances and suggest ways to better manage your debts, possibly suggesting a debt management plan. You can find a reputable credit counselor through the National Foundation for Credit Counseling or the Financial Counseling Association of America.
- Stay on top of your credit. Knowing where your credit stands is important for many parts of your financial life, such as when you're seeking a loan, applying for an apartment or setting up utilities—and good credit can help you save money in all of these areas and more. You can get your credit score for free from Experian to see where you stand and what steps you could take to improve your credit.
Taking control of your debt can bring more than just clarity. It can ease financial stress, save you money on interest and help you navigate your debt-free journey confidently.
4. Get Life Insurance
As a single mom, you play a pivotal role in your child's life—emotionally, financially and otherwise. So, while it's not a pleasant topic to think about, planning for when you're not around is one of the most valuable gifts you can give your loved ones.
One of the main ways to provide for your children in the event of your passing is to make sure you have life insurance. When considering life insurance, think about:
- How much coverage you need: Your policy should be enough to cover your debts, income replacement and your children's future educational costs.
- What type of insurance fits your needs: Term life insurance is often the most straightforward and cost-effective option, but there are other options worth considering.
- How to find the best policy: Do your research and compare quotes from multiple providers to see the best rates and coverage options.
Being prepared and choosing a solid life insurance policy can give you peace of mind, knowing your children will be financially secure if anything happens to you.
5. Learn About Financial Resources and Tools
There are tons of resources, tools and advisors to help you strategize and support you when you need it most. Financial tools and resources for women may help you overcome financial hurdles that can be especially challenging for single moms. These resources can include financial coaching and education, free online courses, investing workshops and more.
You may also benefit from credit counseling and financial assistance offered in your community, your state or online. The important thing is to get help if you need it. It could put you on a path to financial security sooner than later.
Thrive Financially as a Single Mom
Managing finances as a single mom can be daunting, but you can navigate the journey with clarity and confidence with the right strategies and tools. When you take control of debt, put your savings on autopilot and plan for the future, you'll not only improve your own financial well-being, you'll build a legacy of security and opportunity for your family for years to come.
