Making ends meet when you’re single can be difficult; and if you’re single with kids, you’re faced with an even more unique challenge. From buying clothes to putting a roof over your kids’ head — it’s all on you. Budgeting for kids is important for every parent, but it’s absolutely crucial for single parents. Here are eight steps single parents should take to fortify their finances.
1. Involve Your Children in Your Budgeting Process
Some parents don’t involve their children in money discussions, but if a topic isn’t too heavy and the kids are old enough to understand, involving them can keep the family’s budget on track and prepare them for the future.
“Talk with kids about the family budgeting process,” said Kevin Gallegos, consumer finance expert and vice president of new client enrollment and Phoenix operations for Freedom Financial Network. “Even young kids can participate, especially since a good budget starts with family goals. This will guide the budgeting process, making it more about achieving goals than limiting expenses and make it easier to spend smartly. This way, kids can understand the limitations the family faces in a realistic way while getting to participate.”
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2. Figure Out Your Financial Priorities
A good budgeting rule of thumb is the 50-30-20 budgeting rule: Half your net pay should go towards meeting needs, such as housing and groceries; 30 percent should go towards wants, such as taking your kids to a movie or an amusement park; and 20 percent should go towards savings and paying off your debt. When you’re raising your child on your own, you’ll need to create a custom single mom budget or single dad budget, which accounts for factors unique to your situation.
If you don’t make enough to break down your budget by the 50-30-20 rule, figure out what your financial priorities are. Needs should always be covered 100 percent, and use your discretion to determine how to divide whatever money is left over. However, paying off debt, especially high-interest debt, should always be a top priority.
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3. Set Financial Goals for Yourself and Your Children
It’s easier to budget when there is an end-goal in mind. Set short- and long-term financial goals for yourself and your children, and figure out how much you need to save to reach those goals. A short-term goal could be taking a family vacation once a year. If you put aside $100 a month, you could use that to take a $1,200 vacation at the end of the year. A long-term goal could be saving for a child’s college tuition. Consider contributing to a college fund, like a 529 plan, if you have not started one already so that you’ll be able to put your kid through college when the time comes.
4. Rely on an Emergency Fund Over Child Support
Don’t downplay the importance of an emergency fund. Even if you’re receiving child support, it might not be steady support. And, unfortunately in some states, child support isn’t considered late by the courts until it’s 30 days overdue, but this might vary in your state. At that point, even filing a motion requires additional time to collect what’s owed. Therefore, you need a backup plan, just in case the support doesn’t arrive when you need it.
“Savings are critical for everyone, but perhaps especially so for single parents who must rely on one income for all unexpected expenses,” Gallegos said. “It is extremely important for single parents to set aside a specific amount — ideally, a percentage of revenue — regularly. Whatever that number is — 10 percent of income, more if possible, less if necessary — the key is to stick to a percent that works.”
5. Reach Out to Others for Help Saving
Reaching goals takes creativity when you’re struggling and can’t save a lot of cash. Paula Pant, founder of personal finance blog Afford Anything, recommends bartering child care services with friends or family: “If they can watch your child after school on Tuesday and Wednesdays, you’ll watch their children every Saturday night.”
That’s not a bad approach if you’re paying $35 or more each day for after-school care — that’s a weekly savings of $70 or $280 every month.
6. Don’t Ignore Secondhand Clothes and Toys
Being frugal doesn’t mean you have to sacrifice quality.
“Find a thrift store near a hospital,” said Lewis Harrison, author of “Live Like a Millionaire on $17,000 a Year.” “Doctors and their spouses donate children’s clothes and toys to these stores, and the quality is usually quite high.”
Understandably, you want to give your kids the best, but it’s the quality that matters, and your kids likely won’t notice a difference between new and used.
7. Budget for Your Two Lives
Your focus might be on paying bills, but entertainment is also important when creating your monthly budget. If you share custody and don’t have the kids on certain weekends, you’ll need to plan your entertainment budget to encompass two lives: your single life and your time with the children.
First, take a look at your income and expenses to determine how much you can reasonably set aside for entertainment each month, taking into consideration that you’ll probably spend more on weekends when you have the children, and less on weekends when they’re with the other parent. Also, make sure you research free and low-cost activities to stretch your entertainment budget.
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8. Coordinate Who Claims the Children as Tax Dependents
As a single parent, you might look forward to your tax refund each year. But rather than spend this money buying new clothes or electronics, save your refund and use it to pay expenses throughout the year, such as healthcare costs or child care. You and your ex might share child care costs, and this money can provide some needed flexibility; however, if you’re planning on claiming a child to get a bigger refund, make sure you understand tax rules regarding dependents.
The IRS only allows one parent to claim a child, and only that parent can deduct child care expenses. To keep things fair, you and your ex can alternate years. Additionally, you won’t be taxed on child support, but alimony is subject to income tax in most cases. Therefore, you’ll need to keep records as proof of income and save a percentage of each check for taxes.
When you’re a single parent, it can feel like there’s no time for applying budgeting tips. But if you make it a fun activity to do with your children, you can set your budget and teach them how to be financially independent when they grow up. That’s a win-win.
Gabrielle Olya contributed to the reporting for this article.