Financial Tips for Single Moms

• Assess your spending habits and develop a budget

With all financial demands placed on one income, single mothers must first understand how they spend money and make sure they are taking the appropriate steps to meet immediate needs and long-term financial goals. First, review your cash flow to obtain a better sense of where money is going each month. Once you understand your spending habits, you can cut out unnecessary expenses or scale back on exorbitant spending. It's important to develop a budget and stick to it.

• Save for retirement

Even if it is difficult to make ends meet, continuing to make contributions to your retirement account is essential. The best advice for those strapped for cash: Save early and save often. Take advantage of employer contributions to your retirement plan and consider automatic investment plans outside of your retirement plan to increase retirement wealth.

• Make sure you are insured

If you are entirely dependent on one income, having disability insurance is an important part of avoiding serious financial trouble. If you are not covered in the event of an accident, you will not be able to take care of your children. Even more importantly, because you may be the only person responsible for your children's well-being, life insurance is essential to ensure that your children are cared for financially in the event of your death.

• Free yourself from credit card debt

While you may have been able to stretch your standard of living by using credit cards, stop now and pay them off. If you are financing debt on credit cards, you can't save money. And if you are not saving money, you probably do not have sufficient emergency funds to cover three to six months of household expenses — a critical safety net to have, especially if caring for children. Call your credit card companies and ask if they can offer you a better interest rate. If they can't, consider transferring your balance to an institution that can. If you need more help, try contacting a nonprofit credit counseling service. Sometimes creditors are more willing to work with a counseling service than an individual.

• Begin saving for your child's education

Helping to pay for a child's education can be particularly challenging for a single mother. If you decide that you are going to help, it's important that you begin saving as soon as possible. State-sponsored college savings plans (i.e., 529 plans), education IRAs and pre-paid tuition plans are all viable options. Also, because single-parent homes often have low household incomes, they typically qualify for higher amounts of financial aid. When you save for an education, be sure to take advantage of investment strategies that help grow your assets but do not interfere with financial aid eligibility.

• Teach your kids about money

Start teaching your child about your family's financial situation early, and encourage them to be financially responsible and independent. Working part-time and having their own savings account are great ways for children to learn about money. Involve them in family spending decisions, and make sure they understand the concept of spending limits.

Financial Planning for Single Women and Mothers