How to Create a Financial Safety Net
No matter how old you are, it’s never too early to start creating a financial safety net for yourself. If you’re a single mother, you might be thinking that the reality of creating a financial safety net is impossible. But there are small steps you can take to help you save and turn those savings into a safety net to help you out in desperate times. Keep reading to learn our best tips on how to create a financial safety net. This couldn’t be a more ESSENTIAL thing for you to consider for you and your kids.
The first and most obvious tip on how to create a financial safety net is to cut back on spending
Spending is inevitable, but clearly establishing the differences between your wants and your needs in terms of spending will help you to save money quickly to put towards your financial safety net. For groceries, buying in bulk might seem pricy, but if you’ve got a few kids at home and you’re a single mom, buying in bulk can help you save money over time. And all that money you save can be put toward your financial safety net.
When it comes to needs like clothing, consider shopping end of season sales to prepare for the following year for your kids’ clothes. Just purchase a size up and save money while you shop. You can save big time and be better prepared, and all that money you save on essential gear can be put into your financial safety net.
Don’t skip out on insurance
The harsh reality is that both life and money are often unpredictable. Being prepared in the event of an emergency via insurance coverage is crucial. Whether it’s medical coverage, renter’s/homeowner’s insurance, or what have you, paying for an emergency without coverage can leave you in serious debt. And sometimes putting yourself in debt like that is something you won’t be able to financial recover from. One of the best ways to create a financial safety net for yourself is by not forgoing coverage.
Above all, medical coverage for children is crucial. Many child custody agreements make clear expectations for the child’s father to keep an insurance policy for their child, but this isn’t always the case. If you’re a low income household, you can get government assistance to cover your child’s medical expenses via The Children’s Health Insurance Program (CHIP). Take advantage of these programs available to you, and never feel guilty or less for needing help, you’re only one person!
Focus on saving money
If you make goals about saving money, then you’re more likely to turn those goals into reality. And this can also be a learning experience that you can include your kids in. Teaching children about the value of money and the importance of spending will better prepare them for their financial future as an adult. Seriously consider creating a high-yield savings account so that you can grow those savings deposits over time. Many banks offer affordable opportunities for children to start their own checking and savings under you, so reap the benefits of these offers to allow your children to learn the value of saving on their own, too.
Invest in a Roth IRA
A Roth IRA is a very popular way to prepare for your financial future, and companies like Fidelity make this process streamlined and ultra-simple. Each year, you can make a non-taxable contribution of up to $6,000 into your Fidelity Roth IRA and you’ll watch that money slowly grow over time. Most do not have a penalty as long as there are no withdrawals from your IRA account past the age of 59. Your earnings will grow each year completely tax free, and this is a great way to create a financial safety net for yourself even if your company contributes to your 401K each year.
Be serious about creating your financial safety net—and think of it as your emergency fund
If you’re a parent, then you certainly know the truth about the “rainy day” fund. Even the most positive person must be realistic and prepare for the worst. If you do not have an emergency fund started, then you must start now. One financial blow can catapult you straight into a financial crisis if you do not yet have an emergency fund started.
Here are a few tips to get you started in creating your emergency fund:
- Do you have any leftover vacation days at your disposal? See about turning those over into pay that you can add towards your emergency fund.
- Roll those coins. Using Coinstar for your rolled change will take nine cents per every dollar inserted into their machines, so get some change wrappers and get to rolling that spare change. Once you exchange it for bills at the bank, deposit it into your emergency fund.
- Sell clothes on Poshmark. This online retailer of lightly used goods is a great way to start a successful side hustle that can make you serious profits. And those profits can be wisely used to help you create a financial safety net. (More on this below.)
Put your financial safety net into an FDIC-insured bank so it’s safe
There are too many horror stories out there of people’s homes being robbed and their emergency funds being stolen. Storing extra cash in canisters in sock drawers is not safe and criminals look for things just like this when they break in. Don’t let this financial tragedy happen to you. Be smart and put your financial safety net into an account at an FDIC-insured bank so that it’s perfectly safe. What’s even smarter is to have it in a savings account with no ATM card attached. This way if your wallet gets stolen for any reason, no one can ever have access to these funds for use.
Reduce your owed debt
Credit card debt and loans can be extremely stressful if most of your hard-earned money is going towards paying these off. Consider using a debt consolidation company or taking out a loan to pay off your debt so that you only have to focus on one payment a month. If you find yourself in modest debt, concentrate on paying off the smallest debt owed first to give yourself a sense of accomplishment and pride. Celebrate these little wins by taking the money you would have spent on these monthly payments and put it in your emergency fund.
Start a side hustle
Creating a side hustle for yourself is one of the best, if not the very best, ways to help start an emergency fund for yourself and your family. Whether it’s writing online, working as a virtual assistant, selling items on Poshmark, or working a second job when you can, by starting a solid side hustle, this is money you can put directly towards your financial safety net.
Fill your mind with the help of seasoned financial experts
When it comes to financial experts, Dave Ramsey and Suze Orman are two of the most influential financial experts of our time. They’ve each helped thousands upon thousands to learn more about money, spending, ways to cut back, how to save, how to climb out of debt, and so much more. Allow their powerful influence to guide you towards creating a life-long financial safety net for you and your family.
Find a financial advisor to give you advice on how to create a financial safety net
This step might seem intimidating, but no one understands money and the importance of creating a financial safety net quite like a financial advisor does. After all, this is their area of specialty and their trained and licensed in this exact subject. When you take the time to sit down with a financial advisor, they will be able to take an detailed overview on your financial situation. Allow their expertise to teach you what to spend on, what to cut back on, and the best ways to create a financial safety net. Having an outside professional perspective can reshape the way you think about saving money, and it’s the best step towards financial success.
Do you have any ideas of your own to share which have helped you to create a financial safety net for yourself? We’d love to hear what they are—leave us a comment and share!
If you’re a newly single mother and you need some help tackling financial literacy, try reading this next article here on Single Mom Spot that discusses this topic in detail.
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