A guide to empowering single parents on their financial journey

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By Maria Miletic

Almost 20 per cent of Canadian children are raised in single-parent households, which poses unique emotional challenges as well as financial ones since the responsibility of child rearing on a single income can be daunting.

Single parents have similar financial goals to dual-parent families, such as ensuring their children’s economic security and saving for their education. But they confront distinct pressures, including a single and perhaps limited income source, along with limited time for financial planning due to the sole responsibility of child care.

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To illustrate, dual-earner families with two children in Canada have a median employment income of $130,000, while single parents with two kids earn only about a third of that. The strain is exacerbated by the rising cost of living, housing and groceries, to name just a few things.

Despite these hurdles, implementing simple financial strategies can enable parents to focus on long-term priorities, balance their own financial needs with those of their children and find the support they need by creating a personalized wealth management plan, simplifying complex information and providing actionable steps, ultimately affording single parents more time to spend with their children.

Prioritization begins with reflection

A key step in financial planning is identifying long-term goals and examining spending habits to implement a budget. This includes reviewing past bank and credit-card statements to bucket expenses into essentials, debts and discretionary spending. This can help construct a sustainable budget that prioritizes necessities while also addressing any unnecessary costs, such as unused subscriptions.

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Essential expenses may include rent, groceries, daycare and transportation, while debt payments might cover credit-card payments, personal lines of credit or mortgage instalments. After identifying these fixed costs, streamlining them through automatic payments can save time and prevent errors or missed payments.

Although there is no one-size-fits-all approach to debt, it’s generally advisable to reduce high-interest debt first whenever possible. To reduce the debt pressure further, parents can also speak with their financial institution about setting up a mortgage repayment plan that better aligns with their financial situation.

This could involve shifting from biweekly to monthly payments or opting for a longer amortization period if you are up for renewal at a higher rate that has the potential to increase your scheduled payments significantly.

Sticking to a budget requires discipline and accountability, but ensures families are living within their means and creates good financial habits that will support them over the long run.

Balancing financial goals

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Like all families, single parents strive to balance their own financial goals, such as retirement, with those of their children. Thankfully, there are many investment vehicles that can be used to optimize savings and achieve their goals.

For example, the registered education savings plan (RESP) is ideal for saving for children’s post-secondary education. It includes a government match of up to $500 per year on a $2,500 annual contribution per child. Contributions aren’t limited to parents; grandparents and other relatives can also add to the account.

Even small contributions or cash gifts from family on special occasions such as birthdays can significantly boost savings over time, thanks to the power of compound interest if invested appropriately.

Government subsidies and tax benefits, such as the Canada Learning Bond (CLB), offer substantial assistance to families with children under 18. The CLB offers up to $2,000 to help lower-income families save for their children’s post-secondary education, with eligibility based on family size and income.

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In addition, the Canada Child Benefit (CCB) is a tax-free monthly payment that helps eligible families with the costs of raising children. Parents can also claim tax deductions for child-care expenses such as daycares and nannies, up to $8,000 for children under seven and $5,000 for those aged seven to 16.

Single parents may find these programs particularly advantageous as they may face lower annual incomes compared to dual-income households or higher childcare expenses.

Meanwhile, tax-free savings accounts (TFSA) and registered retirement savings plans (RRSP) are great tools that offer tax advantages to maximize long- and short-term personal savings and investing. Taking advantage of employer-matched contributions is critical, as it is essentially free money from an employer that you would not get elsewhere.

Support without fear of judgment

Single parenthood may also accompany complex emotions, such as shame or guilt, particularly when considering re-entering the workforce after parental leave. The decision of if and when to return to work is deeply personal, and the worry of neglecting one’s children can weigh heavily. However, it’s crucial for single parents to seek and accept support during these transitions.

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A financial adviser can significantly reduce stress for single parents by offering supportive, nonjudgmental advice that aligns with their goals and needs. They can support the transition back to work from an income and budgeting perspective, answer financial questions, optimize savings and investments and alleviate some of the emotional distress associated with financial management.

In the end, the most important reminder for single parents is to recognize the value of their well-being. By ensuring their own happiness and peace of mind are priorities, they can create an even more nurturing, stable and fulfilling environment for their children.

Maria Miletic is an investment adviser at The Conlin Group at Richardson Wealth.

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