Raising kids alone is tough work. As a parent running a household on a single income, you face a number of unique financial challenges. One of the most significant? Budgeting to save for the future.
The good news is saving for retirement as a single parent can be done. All it takes is finding creative ways to save while earning a little more to put towards the future.
Here are some helpful tips you can use to save money and get a head start on retirement planning.
Take advantage of government subsidies and programs to bring down childcare costs
It’s no secret that as a single parent, you rely more on childcare services. And this often comes with a hefty price tag.
According to a 2018 provincial government study, Ontario parents of children aged 0-4 are paying as much as $20,000 in childcare annually, per child. It’s no wonder daycare is a major financial hurdle for lone parent households.
Fortunately, there are a number of government programs and subsidies that can help alleviate the cost of child care for eligible parents, creating more opportunity in your monthly budget for saving:
Child Care Expense Deduction: Parents who hire caregivers or enrol their children in nursery schools, day camps, and educational institutions that provide childcare services can claim these programs on their annual tax filings.
Ontario Child Care Fee Subsidy: This subsidy is based on family net adjusted income and is available to parents with children in a licensed child care program or a school board operated before-and-after school program.
Canada Child Benefit: A monthly tax-free payment for eligible families to help with the cost of raising children under the age of 18.
National Child Benefit: As a supplement to the Canada Child Benefit, the National Child Benefit supports low-income families over a 12-month period and is based on the previous year’s tax return.
Ontario Child Benefit: Offers support to eligible low to moderate income families through a maximum payment of $1403.00 per child, per year.
Some child care subsidies are offered in specific municipalities. For example, Toronto offers a child care fee subsidy program to help families keep up with the rising cost of childcare.
Find creative ways to earn a second income from home
Relying on a single income to run a household can be a serious financial barrier when it comes to retirement saving. When budgeting your current income finds you at a break-even point (or close to it), look for creative ways to earn a second income.
Earning a second income doesn’t necessarily mean leaving your home in the evenings to be on the job. Consider seeking out work from home options that allow you to be with your child and earn at the same time. Online sales, social media influencer work, participating in online surveys, pet sitting, and blogging are a few ways you can start earning from home.
Evaluate your home needs and consider downsizing
Your home is your biggest fixed expense and influences your monthly fluctuating costs (utilities, insurance, upkeep).
Your home can also be a place where you can uncover your biggest monthly saving potential.
Evaluate how much space you truly need and decide if you can afford to sell and downsize. Downsizing allows you to save on your mortgage payments while creating the opportunity to cut back on monthly utility spending.
If you have extra room and don’t want to downsize, think about renting space to a trusted tenant and turning your home into an income earning property. Having two people pay the bills is better than one.
Think about prioritizing retirement planning over education savings
Saving for retirement over your child’s education may seem like a selfish move. It also may be difficult; it’s natural that you want to put your son’s needs over your own. But neglecting retirement saving and falling behind can be one of the biggest mistakes you can make as a single parent.
Consider this; your retirement may last over 25 years or more and you might not have control of your retirement date. Deferring your retirement savings to fund your child’s education might mean not having enough time to make up for lost contributions.
Prioritizing your retirement contributions and starting early will give your savings more time to grow. It will also allow you to take advantage of employer matched retirement savings plans if offered. Post-secondary education is an optional expense that has funding alternatives like financial aid, bursaries, and scholarships.
Plus, putting yourself in a place of financial freedom will benefit your children in the long run by removing any burden of financial support in your later years.
Speak to a Wealth Advisor
Taking the right steps as a single parent to plan for the future is important. To get your retirement saving on track, speak to a Meridian Wealth Advisor and discover the best strategy that suits your lifestyle.