I am a very lucky guy. I have a wonderful wife and two great kids. For a long time while I was working my wife was a “stay-at-home” mom. She did a great job managing our household and raising our kids. Most of the time she was 10 times more busy than I was. I found that out first hand this week as she just started a new job (she got a great position as a Director of Human Resources for a well-known non-profit) and was in New York City for training. For this week I found out what life as a single parent would be like. If you are a single parent you are probably smiling right now. Single parents face unique challenges and I certainly don’t need to tell you how busy their lives are. But also among those challenges is the responsibility for the financial well-being of the family, both while you are alive and if something should happen to you.
For the single parent, their children are their top priority, so financial decisions need to be made carefully. Single parents have special planning needs compared to married couples. Without a spouse, the planning will naturally focus more on protecting the children and strengthening their future. Here is a simple checklist for the single parent so that you can help them prepare for the challenges, issues and decisions in the planning process:
- Set up a budget and stick to it – With just one income it is critical for a single parent to pay close attention to how the money is spent. Limiting credit card use is a must and setting priorities for short and long-term goals is essential
- Save for children’s education – It is important to plan properly for this expense. For the single parent this means “save first” spend what is left. This takes discipline and is the key for all to follow.
- Update your will – We see so many parents who have yet to create a will and just as many who have not updated the will’s that they do have. This document is crucial if something should happen to you and will specify how your assets should be managed, who will care for your children and who will be responsible for transferring your properties after your death.
- Set up a trust for minor children – A will can establish a trust to better protect the children’s financial interests and control how the assets can be distributed. In this way your wishes can live on after you are gone
- Review your life insurance – Most single parents are the only financial support for their children making life insurance an even greater necessity. Life proceeds should also be tied to an ILIT (Irrevocable Life Insurance Trust) so the proceeds can be excluded from your estate and avoid estate taxation.
As you can see, the planning for a single parent is all about the kids. After spending a week as a single parent I can see why. Take the time to understand that about your clients who are single parents and you will certainly find success.