It's tough enough to plan for the financial future in a traditional two-parent family. The task is even harder for families headed by one parent.
With the inevitable stresses on one-income households, it becomes a juggling act to ensure that all of the financial planning priorities are taken care of, according to Christine Van Cauwenberghe, a financial-planning expert at Investors Group in Winnipeg.
Single parents, says Van Cauwenberghe, need to have honest discussions with their children about finances and fiscal responsibility. They have to set a budget for every aspect, from education to retirement planning, and even their children's marriages.
It's particularly important for single parents to sit down with their financial planners to figure out a way to meet all their priorities. If anything were to happen to them, says Van Cauwenberghe, their children run the risk of not having a caregiver if the other parent isn't in the picture.
Insurance should be a key consideration in this regard, not just life coverage but also disability, critical care and long-term care. But never designate minor children as beneficiaries, whether of insurance policies or registered investments, Van Cauwenberghe says. “We tell clients to leave it to their children in their will but appoint a trustee to manage," she says.
Often times, a newly single parent doesn't move immediately to cut costs, opting instead to hang on to things like a mortgaged home and the car at a time when the family is reduced to living on one income instead of two.
Van Cauwenberghe coaches newly single parents not to take on any new financial commitments, whether it's for a trip or sports lessons for the kids. "What I'd really like to see is for them act quickly to cut costs but take time to make new commitments."
– By Ed Coury, senior editor and Midwest bureau chief for the Wall Street Journal Radio Network, Dow Jones & Co., and a reporter for WWJ Newsradio 950
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