As a single parent, you bear tremendous responsibility for your family's financial well-being. If you haven't yet begun to save money on a regular basis, start with these four types of savings plans. They are sequential; start with the first type of savings plan - an emergency savings fund - and work your way up to saving money for your child's college fund.
Emergency Savings Fund
We all encounter occasional emergencies. At the worst possible time, the car needs to be repaired, or your refrigerator gives out. Most of the time, these financial emergencies are unexpected and unplanned for; and too often, you're forced to put the charges on a credit card or borrow from a family member. What you need to do is set up an emergency savings fund. Plan to save at least $1,000, and consider ultimately growing your emergency fund to include up to six months of livings expenses.
- Begin by saving just $25 per month.
- Open a separate savings account where you will keep this money.
- Have your bank automatically transfer the amount monthly from your checking account into your savings account.
This is when you are saving money for a specific purpose. Ideally, this should happen after you'd already built up your emergency savings fund. Examples of goal-oriented savings include saving for a house, a car, new furniture, or a vacation.
- Once you've built up your emergency savings fund, the same amount of money could then be contributed to your goal-oriented savings account.
- This should also be a separate account so that it can not easily be spent on other things.
- Train yourself not to purchase these items on credit any longer.
Unless your employer provides an exceptional retirement savings plan, it's up to you to begin setting aside the money you'll need to live on when you're no longer working. Of course this seems incredibly far away, but the more you can set aside each month now, the more you'll be able to save over the years.
Once you've accumulated your emergency savings fund and begun to set aside money each month for retirement, it's time to consider college savings. Don't make the mistake of seeing this goal as too large to ever accomplish. Any amount that you can set aside each month will be helpful.