Managing Financial Challenges for Single Parents

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Single parents may have a different financial plan than those who are married or live with a domestic partner. While you may face many changes, you can still thrive and develop ways to manage your money.

There are resources and assistance programs available for single parents struggling to navigate child support, car insurance, emergency funds, home loan and debt, to name a few financial adjustments. You are not alone.

How COVID-19 Affects Single Parents

COVID-19 has upended life for people around the world. According to the Pew Research Center, single parents are more likely to live in poverty than parents who are together, and women are more likely than men to be parenting solo.

Single mothers, who don’t have the option to trade child care and work duties with a partner and are more likely to work low-wage jobs, are at the greatest disadvantage, according to the Brookings Institution. Low-wage jobs in the retail and hospitality industries can’t accommodate work-from-home arrangements, so when school isn’t in session, single parents can’t work.

The Brookings Institution also notes that 17% of working women (more than 10 million) and 12% of working men rely on the school and child care systems to watch their children while they are at work.

Parents who can work remotely also need to figure out how to balance conducting full-time work and manage their children’s schoolwork. For children in school districts that have moved to a partial or full distance-learning model, this can range from starting a child’s Zoom meetings to conducting multiple daily assignments, overseeing work production and documenting evidence of work to submit to the child’s teacher.

Insight From Single Parents

Maran Mascaro, Executive Assistant to the Chief Financial Officer of the Military Department Washington, and Ryan Savage, a Mortgage Loan Originator at First Community Mortgage in Tennessee, spoke about the financial challenges of being single parents.

  1. What financial resources are available to single parents who also are veterans or students?
  2. What’s the most challenging thing about being a single parent?
  3. Do you have any advice for newly single parents or separated single parents?
  4. What are the most important considerations for building a budget as a single parent?
  5. What’s your biggest struggle parenting in the time of COVID-19?
  6. How easy or difficult is it to qualify for a mortgage as a single parent?
Maran Mascaro
Maran Mascaro

Administrative Associate, Washington Military Department

Ryan Savage
Ryan Savage

Mortgage Loan Originator at First Community Mortgage

6 Money Challenges Single Parents Encounter and How to Thrive

The most pressing challenge single parents face is creating and sticking to a budget. Saving for retirement and your child’s education are great things to do, but they may not be possible for people living paycheck-to-paycheck.

According to the Brookings Institution, “63% are in their prime working years (ages 25-54), and 57% work full-time year-round, indicating the position is not a side activity.” In addition, 41% of single parents live in households that are 200% below the federal poverty level.

Single parents also face challenges with debt and improving their credit scores, finding affordable child care and securing the appropriate auto insurance policies.

1. Budgeting

Building a budget as a single parent presents more challenges than partnered parents because they don’t have another person to share expenses. Track your spending for a few months to build a budget, considering your fixed expenses (such as rent or mortgage and insurance) and variable expenses (such as utilities, gas and groceries).

BEST WAYS TO BUDGET

Single parents who are living on a low income or paycheck-to-paycheck have the most pressing challenge. If you have to, you can get a roommate or use a service like CoAbode to find another single mom to live with and share expenses and household chores. Some single parents have even listed a bedroom on Airbnb to bring in extra income.

Be as honest with your children as possible, given their ages, to help them understand that they can’t have everything they may want, but they will get what they need. Teach them why you’re making the decisions you are, so they have a better understanding of how to plan their own finances when they get older and money concepts such as compound interest.

2. Tackling Debt and Improving Credit Scores

After building your budget and accounting for your basic expenditures, the next thing to do is to set up a plan to pay off any debts. You’ll want to pay off loans or credit cards that have the highest interest rates because you’ll save the most money that way.

Experian analyzed consumer debt from 2009 to 2019 and found that “average student loan balances saw the largest increase in the past decade — growing more than $15,000, or 73%. Auto debt experienced the second-largest growth, and retail credit card debt followed with the third-highest increase.”

BEST WAYS TO TACKLE DEBT AND IMPROVE CREDIT

One way to pay down a credit card is to transfer the balance to a new account with a 0% interest rate. Research the best credit cards, and don’t forget: How much you’ll qualify for depends on your credit score and payment history. If your credit score is less than optimal, you’ll first want to call creditors and work with them to establish a payment schedule you can follow. Then make sure to pay your bills on time. Lock your cards so you can’t use them. These steps can help you start improving your credit score.

Finally, keep an eye on your annual credit report and pull it once a year to make sure there are no surprises. Your report is a good way to watch out for stolen identity and someone else attempting to open accounts in your name.

If you’ve been a victim of identity theft, you should freeze your credit with each credit bureau: Experian, Equifax and Transunion. Freezing your credit means you won’t be able to open new accounts, so you’ll have to unfreeze your credit with each bureau to take out a home or auto loan, but it does provide peace of mind.

3. Child Care

Searching for affordable child care can be difficult if single-parent families are relying on one income. According to Child Care Aware of America, 36% of a single parent’s income is spent on child care, but it can vary depending on the number of children and where you live. The national average cost of child care is between $9,100 to $9,600 a year for one child.

BEST WAYS TO NAVIGATE CHILD CARE

If you have the means, you can split child care costs among both parents equally. You’ll have to discuss this option with the child’s other parent. However, childcare still has a hefty price tag.

Luckily, during COVID-19, many jobs are remote. Single parents who work remotely can save on child care costs by keeping their children at home. This is a great option for those who could work when their children are sleeping, such as freelance writers, editors, graphic designers and jobs with flexible schedules.

Another option is to opt for in-home care instead of a day-care center, which might be cheaper. But parents should vet in-home care providers appropriately to make sure they’re certified. The last option is to rely on the patchwork care that family and friends can provide to help you during after-school hours or for a few days during the week so you can work.

Federal programs such as Head Start can also help reduce child care costs. Head Start uses your income to determine if you are eligible.

4. Homeownership

Buying a home can be a great investment for single parents if they live in an area where renting is more expensive than buying and if they have the money for a down payment and closing costs.

Jason Hidalgo, a USA Today Network reporter who covers real estate, said as a general rule, you don’t want to spend more than 30% of your gross income on housing. Unfortunately, it can mean homeownership is out of reach for many people due to record median home prices and record rents.

“In a normal market, the cost of buying a home typically starts to break even with the cost of renting an apartment by the fourth or fifth year, and everything from that point onward basically builds wealth (barring a real estate crash),” Hidalgo said. “There’s a reason why homes are typically the largest source of wealth for U.S. households. You’re essentially paying yourself as opposed to an apartment owner.”

Pros and cons of buying a house

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Pros

  • Homeowners get tax breaks.
  • You’re building equity in your home instead of just paying rent every month.
  • Fixed-rate mortgage payments stay the same from month to month.
  • You can modify your home however you like.
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Cons

  • Homeowners associations can be a hassle. Make sure to research prospective HOAs.
  • There are additional costs associated with buying a home (and even more for selling), such as inspections, insurance, mortgage insurance and title fees.
  • Home repairs are on you.
  • It costs a great deal to sell your home, so you’re less mobile.

The first thing to figure out is how much house you can afford based on your income and debts. A mortgage lender will consider your debt-to-income (DTI) ratio to determine how much you qualify for, which will determine your house budget. Your debt-to-income ratio is especially important as a single person since you’ll be the only person paying for the expenses. Ultimately, this means you’ll probably qualify for less money for a house than if you had a second income.

However, just because you qualify for a large amount does not mean you should buy a house at the top of your budget. Keep in mind that you should still have an emergency fund. Another thing to consider is whether you’re interested or have the ability to do your own home repairs. If not, renting might be your best bet.

BEST SOLUTIONS FOR BUYING A HOME

Qualifying for a mortgage requires good credit and steady employment on a W2. The first step to buying a home is to work with a mortgage lender to get pre-qualified. There are special qualifications for first-time homebuyers and veterans.

Single moms and dads can still qualify for conventional, first-time homebuyer and VA loans as long as they have good credit and steady employment history. VA loans don’t require a down payment and FHA loans require only a 3.5% down payment. Both of these loans are options if your credit is in the 580 to 620 range.

Calculate what you can afford by putting the price of the home, as well as the interest rate you qualify for, and down payment into a mortgage calculator tool. By doing this, you can shop within your budget.

Additionally, Fannie Mae offers a conventional loan program called HomeReady for first-time homebuyers with a low income, and Freddie Mac offers the Home Possible loan. Both of these programs only require a 3% down payment.

5. Insurance

Single parents who don’t have another partner to build an emergency fund in case of a disaster may need comprehensive insurance policies — home or renters, life, health and auto policies, which can protect you and your family when tragedies occur.

BEST WAYS TO NAVIGATE BUYING INSURANCE

Homeowners and renters insurance protect your dwelling, as well as your personal property or contents, and are great protection in case of a fire or other natural disaster. Compare home insurance quotes so you can purchase the coverage you need.

Some insurers offer multi-policy discounts, so check with the company that carries your home insurance to see if they also offer auto, health or life insurance.

If you need auto insurance, shop around and compare car insurance quotes to see which insurers offer the best rates. Your auto insurance cost may not decrease as a single person. You may see a slight change rather than saving more on car insurance, so it’s a good idea to check with your current provider or explore other options.

Health insurance could be a challenge for single parents if they were covered under a former spouse’s plan. If that’s the case, you’ll have to secure your own health insurance policy because once your divorce is final, your former spouse’s insurance carrier will remove you from his or her plan. Open enrollment for health insurance through the Affordable Care Act (ACA) marketplace is available through December 15. Cost is the biggest barrier to affording insurance, but some states offer subsidies for low-income earners, so make sure to check into that if you qualify.

Finally, consider getting a basic life insurance policy, which would protect your dependents in the event of your death. Term life insurance is the cheapest option and might be best for single parents on a budget. Permanent life — which includes whole life and universal life — is another option, but it could be costly.

6. Saving for the Future

Getting in the habit of saving is difficult but important. You’ll want to “pay yourself first” and establish an emergency fund that covers three to six months of expenses in case of an emergency. American families, unfortunately, typically don’t have that much in savings.

“While the typical Black or Hispanic family has $2,000 or less in liquid savings, the typical White family has more than four times that amount. Other families fall somewhere in the middle, with the typical family holding $5,000 in liquid savings,” according to the Federal Reserve’s 2020 study “Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances.”

WAYS TO SAVE FOR THE FUTURE

Start small if you have to with saving $50 a month. If you can, have the money deducted from your paycheck, so you don’t miss it, or set up an automatic transfer to your emergency fund (and disconnect it from your debit card so you can’t withdraw money from the account.) Setting up a few different savings accounts is a good option: One savings account for your kids, one strictly as an emergency fund and another as a discretionary savings account.

Maximize contributions to your 401(k) account if your employer offers one. If not, set up a Roth IRA with a financial advisor or your bank to start saving for retirement.

Featured Blogger for Single Parents
Nakisha Wynn

Nakisha Wynn is an African-American mom blogger and mother of four. She is a speaker, entrepreneur and content strategist who empowers moms to pursue the life they want by developing extra income and leveraging online marketing. Her mission is to help moms discover how they can make money from home while actively raising a family.

"Achieving financial freedom as a single parent can be quite simple,” Wynn said. “Invest wisely, budget ruthlessly, but most importantly, create multiple streams of income. Having many ways to make money will allow you more freedom and flexibility when managing a household solo." Visit Nakisha's Blog

Frequently Asked Questions Regarding Single Parenthood

Additional questions single parents may wonder about include food assistance, resources to help single parents attending college, what the child tax credit is, whether their kids can qualify for financial aid, whether they can adopt or foster kids and whether they qualify for housing assistance.

Advice From Financial Planning Experts on Single Parent Finances

  1. What are some good guidelines for building a budget as a single parent?
  2. Is it more important to pay down debt or establish an emergency savings fund?
  3. Are there any resources for single parents who are struggling to educate their children during the time of COVID-19?
  4. Are there any good books or other resources for single parents who are planning their financial future?
  5. How does being a single parent affect your child’s future college funding?
  6. How can single parents find a financial planner, and how much does it cost?
Benjamin Nachman
Benjamin Nachman

Founder & CEO at Jassby

Rico Nelson
Rico Nelson

Vice President at MassMutual Colorado, CLU

Karen Vibe
Karen Vibe

Associate Branch Manager, Managing Director at Ameriprise Financial Services

Resources for Single Parents

Single parents can access federal government support, such as Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP) for food stamps loaded onto an EBT card and HeadStart preschool programs. There are also advocacy organizations and community support groups to help single moms and dads navigate solo parenting.

Educational Support and Assistance

Advocacy Organizations

  • Afterschool Alliance: This advocacy group is working to raise awareness around the need for providing after-school care for all children. It has a cool tool that allows users to see budget impacts state-by-state for after-school programs to see if they’ve been affected.
  • Single Parent Advocate: This is a nonprofit, faith-based organization that provides information and resources to single parents to help them raise thriving children.
  • The Singletons: The Singletons is an Arizona nonprofit that provides help and resources to single parents who are facing a cancer diagnosis or have a child who has cancer. Parents can request services like meals or help with child care.

Community Support Groups

  • Parents Without Partners: This organization is a nonprofit 401c(3) dedicated to supporting single parents without partners and their children. It’s a non-sectarian organization and has a Facebook group where parents can follow.
  • Single Mothers Outreach: This organization is for single parents in the Santa Clarita Valley of California who have children aged 18 and younger. It provides case management, support groups and special programs like adopting families for the holidays.
  • Single Parents Alliance of America: Make new friends and connections through this community that aims to provide support and resources for single parents.

Government Programs and Assistance

Housing Assistance Resources

  • Fellowship Housing: This Illinois program provides housing to single mothers and their children, teaches them about financial management and helps them secure long-term housing upon graduation.
  • U.S. Department of Housing & Urban Development: This resource locator pinpoints your location so you can find nearby affordable housing, the nearest HUD office or the local public housing authority.
  • Warwick Dunn Charities: NFL veteran Warwick Dunn’s charity helps people with down payment assistance, home furnishings and home purchases. The charity has donated 173 homes to single parents through the organization, alongside Habitat for Humanity.
About the Author


Laura Longero is a professional single mother and award-winning writer and editor who lives in Northern Nevada. She owns a condo and enjoys translating technical information to help others pave their way to financial freedom.

About the Author


expert-profile


Laura Longero is a professional single mother and award-winning writer and editor who lives in Northern Nevada. She owns a condo and enjoys translating technical information to help others pave their way to financial freedom.


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