The Single Parent and the Emergency Fund
Running a home and raising a child on a single income is challenging to say the least. Doing it all as a single parent just might qualify you for superhero status. Budgeting is key to survival in the single income home. Often times we find ourselves skipping savings just to get to the next cheque and forget to create an emergency fund. Don’t have one? You really need to set one up up now. It is critical for the single parent to have an emergency fund in place. The loss of a job, illness or unexpected house/car repair can be devastating and lead to living on credit. Sometimes, the debt becomes too large to manage even with a return to work.
Single parents are at higher risk for filing for bankruptcy, consumer proposal, or debt settlement. They account for approximately 43% of all those with children that file for bankruptcy or consumer proposal, according to the Joe Debtor Study of 2017. An emergency fund will help see you through that financial set-back while still keeping a roof over your head and for the most part, staying ahead of the rest of the bills.
The Single Parent Emergency Fund
The Emergency Fund is part of any sensible and realistic personal budget. Especially if you only have one income to live on. The following are 4 key components of building a budget that focuses on responsible savings so grab a pen, some paper, a calculator and be ruthless about every penny. It’s harder to get to where you need to be if you don’t know exactly where you’re starting from.
- Write down the amount of your entire income per month. Include all all money that comes into the household. This means your pay cheque, child care benefit or child tax, child support or alimony if you get them.
- Determine the total amount of all of your expenses. This includes fixed expenses where its the same amount every month like rent/mortgage, insurance and utilities. Coupled with variable expenses which means they change all the time, for example groceries, clothes and school fees. When you have children, it’s especially important to account for unexpected costs because growth spurts are unpredictable!
- Set a goal for saving 10% of your income. Start with 5% and work your way up. Setting mini goals is a great way to save. First goal is to save 2 weeks pay. Next goal is to save 3 months pay. After you reach 3 months savings then you can start diverting a bit of extra cash to pay down credit card debt or invest towards education or retirement.
- Make your savings a priority as they will keep you from having to use credit right away if not altogether.
At the end of the day, a budget is never meant to be a punishment but much like going to the gym…it only works if you commit to it.
At PYLO Finance Inc., we believe that encouraging healthy money skills is paramount to your financial well being. Our team is available if you should ever have any questions.