The single parent’s guide to making ends meet
It’s easy to spend too much on the kids, writes Susan Edmunds.
Gabriella Monaghan has been a single mother for the past two years. The hardest part, financially, about adapting to parenting alone has been knowing that her family relies entirely on her income.
‘‘I have had to use holiday days as sick days in the past because I ran out of my sick leave,’’ she says.
‘‘I’ve also had to stick to a budget a lot more and save for financial uncertainties. I save $10 a week in case my car needs a new tyre or anything like that. I have already started putting money aside each week for things in specified saving accounts, like their schooling even though one is almost 4 and the other is five months old.
‘‘There’s an account I save towards their birthday parties, an account towards Christmas and birthday presents, an account towards extracurricular activities. I have to save small amounts each week so that the kids can still do things, as there is only my income to pay for that stuff.’’
Financial experts say that while many of the money concerns of single parents are similar to those who are living with a partner, there are some things that they need to do differently.
Budget
ASB’s general manager of wealth, Jonathan Beale, said people should draw up a budget so they knew what they had available to spend, and could prioritise.
Some costs, such as childcare, might be more of a priority for single parents than for those parenting as a couple, he said.
Ana-Marie Lockyer, head of wealth at ANZ, said single parents would usually be under more financial pressure than couples, so having a budget was important.
‘‘Bear in mind that your situation and earning power will change as your kids get older so continue to review it. There are lots of organisations out there who can help.’’
Financial adviser Liz Koh said some single parents spent too much money on their children. ‘‘It is usually driven by guilt over what has happened, and a strong desire to maintain the children’s standard of living despite a relationship breakdown. It can lead to high levels of debt.’’
Entitlements
Single parents should check they are getting as much Government assistance as they are entitled to. If you are parenting alone, you can qualify for Working for Families help, even if you are only working 20 hours a week. You may also qualify for an accommodation supplement or other help. Budget advisers can help with this.
Moving on
Don’t wait until you meet someone else to get sorted.
Lockyer said a house could be a good investment for single parents. As well as providing a long-term asset, it offers extra stability and security for your family.
‘‘If you’re in your own home, focus on trying to pay off the mortgage. If not, consider how you can get on the property ladder, including talking to your provider or Housing New Zealand about using KiwiSaver for a first-home withdrawal.’’
Many single parents will qualify for a Welcome Home Loan, which allows for a smaller deposit.
Emergency fund
Beale said single parents should have an emergency savings account to cover them if they were without an income for a period of time, or in case of a large expense.
‘‘Everyone should have an emergency fund but it becomes more important when it’s just one of you because if you have two people earning you can lean on the other person a bit but a single parent would not have that luxury.’’
Avoiding expensive loans and consumer debt is also more important when you rely on one income – it can quickly get out of hand if you fall behind in your repayments.
Plan for the future
Beale said that when he was working as a financial adviser, he saw people forgetting about their own needs when they prioritised their kids.
‘‘Single people night be even more focused on their children and forget a bit about themselves. They still need to be thinking about what their retirement will be like – I’m sure single parents want to have a great retirement, just like everyone else.’’
Lockyer agreed retirement planning was important. ‘‘Even though you may have a tight budget now, it’s important to try and look out for the future too. Try and contribute to KiwiSaver and take advantage of the additional contributions from your employer and the Government in the form of member tax credit.’’
Don’t make the mistake of saving for your kids’ university fees before putting money aside for yourself – they can take a student loan but you cannot borrow your way to a comfortable retirement.
Insurance
Lockyer said single parents could consider taking out a simple life insurance policy to cover funeral costs, the mortgage and the kids’ education, so their children were taken care of should the worst happen. You could also consider income protection cover if you would struggle to get by on ACC or the sickness benefit.
Estate planning
Draw up a will and keep it current. If you own assets such as a house you might want to put them in a trust. Your will should also cover what you want to done with the proceeds of any life insurance payment.