Apart from immense mental strength, single moms need a sturdy money plan to support their children and self, and have a good financial future.
Motherhood is a joyful experience but it can be quite demanding too, especially when you have to juggle with work, household chores, and raising children. And the challenges increase manifold when you are a single mother and have to get all the things done by yourself. Apart from immense mental strength, you need a sturdy money plan to support your children and self, and have a good future. Here are some of the things you must consider having in place for better financial health.
Adequate insurance cover for life and health
Life and health insurance are the most important aspects of financial planning and you need it all the more if you have children dependent solely on you. While a life cover ensures replacement of your income in case of an untimely demise, health insurance takes care of all the hospitalization expenses for members covered in a plan. An adequate life cover should be worth 20 times of your annual income. Term insurance can offer you a cover of that size at a reasonably low premium cost. When it comes to health insurance, decide between individual plan and floater, basis the number of members in your family and the extent of coverage you need.
Emergency fund for the unforeseen
Apart from life and health insurance, you need to have an emergency fund in place to build a strong line of defence against anything unforeseen such as a health issue or job loss. This fund should be worth your expenses for 6 to 12 months. Set aside an amount every month to build a liquid fund that can be withdrawn without any exit load.
Ensure efficient tax planning
Mentioning this is of utmost importance, especially because we are in the middle of a tax season. Plan your taxes effectively to avoid unnecessary tax outgo and save all your hard-earned money through appropriate investments. Also make sure you don’t rush into an investment hard sold by an agent or going by your friend’s advice. Assess your requirements, goals and risk appetite before deciding upon your investment instruments.
Amidst other financial commitments, don’t forget to set aside an amount every month to build your retirement fund. Don’t procrastinate on this. Let the power of compounding work on your money. The sooner you start, the mightier your fund will grow. You need to invest in aggressive, inflation-beating assets to build a long-term fund for your children’s higher education/ marriage and retirement.
Equity-oriented mutual funds or hybrid funds can be a good choice. You can start investing through SIP in mutual funds. This way you can start small and boost your contribution with increase in income.
(The writer is CEO, BankBazaar.com)