A guide to empowering single parents on their financial journey

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By Maria Miletic

Almost 20 per cent of Canadian children are raised in single-parent households, which presents unique emotional challenges as well as financial problems as the responsibility of raising a child on a single income can be difficult.

Single parents have the same financial goals as single-parent families, such as ensuring their children’s financial security and saving for their education. But they face different pressures, including a single and possibly limited source of income, along with limited time for financial planning due to the sole responsibility of caring for children.

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To illustrate, a family with two children in Canada has an average labor income of $130,000, while a single parent with two children earns only a third. These tensions are exacerbated by rising costs of living, housing and groceries, to name just a few.

Despite these obstacles, implementing a simple financial strategy can enable parents to focus on long-term priorities, balance their own financial needs with their children’s and find the support they need by creating a personalized wealth management plan, simplifying complex information and providing steps that can be done. , ultimately affording single parents time to spend with their children.

Prioritization begins with reflection

A key step in financial planning is identifying your long-term goals and reviewing your spending habits to stick to your budget. This includes reviewing past bank and credit card statements to group expenses into essentials, debt and discretionary spending. This can help you build a sustainable budget that prioritizes your needs while also addressing unnecessary expenses, such as unused subscriptions.

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Essential expenses may include rent, groceries, daycare and transportation, while debt payments may cover credit card payments, personal lines of credit or mortgage payments. After identifying these fixed costs, streamlining through automatic payments can save time and prevent errors or missed payments.

Although there is no one-size-fits-all approach to debt, it is generally recommended to reduce high-interest debt first if possible. To reduce the pressure of debt even more, parents can also talk to financial institutions about setting up a mortgage payment plan that better suits their financial situation.

This may include changing from bi-weekly to monthly payments or choosing a longer amortization period if you want to renew at a higher rate which can significantly increase your scheduled payments.

Sticking to a budget requires discipline and responsibility, but ensuring your family lives within their means and creating good financial habits will support them in the long run.

Balance financial goals

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Like all families, single parents strive to balance their own financial goals, such as retirement, with those of their children. Fortunately, there are many investment vehicles that you can use to maximize your savings and reach your goals.

For example, a registered education savings plan (RESP) is suitable for saving for post-secondary education. This includes a government match of up to $500 per year with an annual contribution of $2,500 per child. Contributions are not limited to parents; grandparents and other relatives can also add accounts.

Even small donations or cash gifts from family on special occasions such as birthdays can add significantly to your savings over time, due to the power of compound interest if invested appropriately.

Government subsidies and tax credits, such as the Canada Learning Bond (CLB), offer great help to families with children under 18. The CLB offers up to $2,000 to help low-income families fund their children’s post-secondary education, with qualifications based on family size and income.

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In addition, the Canada Child Benefit (CCB) is a tax-free monthly payment that helps eligible families with the cost of raising a child. Parents can also claim a tax deduction for childcare costs such as daycares and nannies, up to $8,000 for children under seven and $5,000 for ages seven to 16.

Single parents may find the program more beneficial because they may experience lower annual incomes compared to dual-income households or higher child care costs.

Meanwhile, tax-free savings accounts (TFSAs) and registered retirement savings plans (RRSPs) are great tools that offer tax advantages for maximizing your long-term and short-term personal savings and investments. Taking advantage of employer-matching contributions is critical, because it means free money from employers that you would not get elsewhere.

Support without fear of judgment

Single parents can be accompanied by complex emotions, such as shame or guilt, especially when considering re-entering the workforce after parental leave. The decision if and when to return to work is a personal one, and the worry of neglecting children can be overwhelming. However, it is very important for single parents to find and receive support during the transition.

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Financial advisors can reduce stress for single parents by providing supportive, nonjudgmental advice tailored to their goals and needs. They can support the transition back to work from an income and budgeting perspective, answer financial questions, optimize savings and investments and alleviate some of the emotional conditions associated with financial management.

Ultimately, the most important reminder for single parents is to recognize the value of their well-being. By making sure their happiness and peace of mind is a priority, they can create a more nurturing, stable and fun environment for their children.

Maria Miletic is an investment advisor at The Conlin Group at Richardson Wealth.

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