Financial Planning Tips For Single Parents
It is important to know and understand that with the correct financial planning, there are ways to make your money work for you, to ensure a secure future for your kids and for yourself. You need to be prudent to ensure you focus on saving from the very beginning and ensure that you invest in very safe investment options.
Here Are Some Financial Tips Which Will Help You Find Ground:
Understand Where You Stand Financially
Typically, a divorce or the death of a spouse will have you emotionally and mentally drained. You need to overcome this quickly and focus on where you stand financially. In most cases, a divorce or a death will bring some money, either as compensation in a divorce or from life insurance in the case of a death. You need to secure this money in a short term safe investment option until you have time to properly plan your finances. The best way to do this is to invest in a FD. An FD in easy to break when required yet is safe from market volatility.
Understand Your Asset Allocation
When your family is being supported by the incomes of you and your spouse, your financial investments can afford to be more aggressive. You may have a larger share of investments in equity; however, with only one source of income you will need to reallocate your investments. You will need to reduce your exposure in high risk equities and instead invest heavily in low risk bonds and mutual funds.
Invest in Fixed Deposits
Fixed Deposits are one of the most secure investment options as they are safe yet allow for easy liquidity. Further, FDs offer higher interest rates than bank savings accounts. They also help you by curtailing your spending as the cash is not kept in your account. Choose a stable and reliable company FD by checking its ratings rather than a bank FD for higher returns. If you choose a non-cumulative Fixed Deposit, you can receive interest pay-outs monthly, quarterly or annually to help you with living expenses.
Build Long Term Wealth
Invest in a SIP or Systematic Investment Plan, which allows the investor to build a large corpus over a period of time. A SIP requires you to invest a small amount of money periodically monthly, helping you to reduce market risks. Over a period of time, as the market grows the value of the investment increases substantially. A SIP comes with market related risks as the money invested by you is invested in equity and bonds on the stock market, so you have to be cautious.
Do the Paperwork
On the unfortunate event of the death of your spouse, remember to do the paperwork and ensure that you transfer any assets either jointly held or held in the name of the spouse in your name immediately. The process may be tedious, but it is better to do it immediately rather than postpone the work to a later time increasing complications.
Take a Life Insurance Policy
Building financial security for your child is clearly top priority for single parents. While the insurance pay-out on the death of a spouse or the child support received may take care of day-to-day requirements, a large term life insurance policy ensures that your child is provided with financial stability for the future. A life insurance policy is not expensive and provides peace of mind.
Keep Your Retirement in Mind
When you become a single parent, your thoughts and resources are spent in providing for your child; however, you need to also plan for your financial security, especially after you retire. Pick from a range of low risk investments that will grow over a period of time such as SIPs or FDs.
Being a single parent brings with it many financial responsibilities, which were earlier shared between two. You need to understand your financial requirements and plan for the future. In the process, select safe financial investments such Fixed Deposits to help your money grow. Bajaj Finance, which provides higher than market interest rates, an easy online application process with less documentation and a hassle free experience, should be on your list