If you're a single mom, sound financial planning is all the more critical as your stretched income must provide for many needs and you have to have a plan for your children in the event of your death, disability or critical illness.
A whopping 46% of mothers in metropolitan SA describe themselves as single mothers, according to last year's Old Mutual Savings & Investment Monitor.
Though this number has come down from 50% in 2017, the poorer the household, the higher the incidence of single motherhood.
Financial planning for single parents is an issue close to Mary J Fourie's heart. The Cape Town-based financial planner and coach lost her father when she was only five years old. He didn't have life insurance.
"It impacted my relationship with money and it's why I do the job I do now."
If you're a single mom, there are five bases that you absolutely have to cover, she and other planners say.
Your risks
We are all at risk of dying in an accident, becoming disabled, either temporarily or permanently, or succumbing to a critical illness.
"You can never save enough to cover these risk events," says Nelisiwe Ndlovu, who holds the certified financial planner qualification.
Insurance against death can provide for your children until they are financially independent if you die before they can support themselves.
Disability insurance and income protection pay out in the event of your becoming temporarily or permanently unable to do your job. Disability cover can be paid as a lump sum or as an income. Ideally, you want both. The lump sum is useful to settle any big debts, such as a home loan or car loan, and to modify your home for your disability, while income replaces a percentage your monthly salary.
Income protection is critical, Ndlovu says, as your ability to earn is your biggest asset.
Your will
"Having a will is crucial in deciding what you want to happen to your children," says Fourie. Ndlovu agrees: "In your will, you nominate a guardian for your children and state how you want your assets distributed for the benefit of your children."
Failing to have a will or a guardian for your children could result in their inheritance going to the Guardian's Fund and creating difficulties in accessing funds for day-to-day living.
If you are not sure of the guardian's ability to manage the money, you may want the inheritance to be put in a trust and used for the benefit of your children until they can manage it themselves.
A well-drafted will may also protect the inheritance from children who are not emotionally mature enough to manage large sums of money, Fourie says.
Your family's health
Medical scheme and gap cover will cost you, but can also save you a pretty packet.
Elle is a recently divorced mother of two. She works for a financial adviser and is studying to become one herself. Last month, she realised the value of her medical scheme when her daughter suffered from appendicitis, which took doctors weeks and numerous tests to diagnose.
Eventually, a CT scan revealed an abscess on her appendix, but by the time she was operated on the abscess had burst. "I can only imagine what might have happened if we had been patients of the state. I'm on a medical scheme option with unlimited GP visits and good hospital cover."
The total cost, for tests and hospitalisation, was more than R120,000. Elle had to pay about R5,000.
Emergencies
An emergency fund might sound like a dream, but it's key, says Fourie.
Ndlovu says you ideally want at least six months of your take-home pay saved in a bank account which is easily accessible in the event of an emergency. Even one month's salary is better than nothing, because when you're living on a tight budget an emergency can decimate your finances and lead to you taking on costly debt.
Your retirement
Saving for retirement is a must, says Fourie. Single moms know better than anyone that "a man is not a financial plan". Well, nor are your children. They're meant to depend on you up to an age. You're not meant to depend on them, and they may be unwilling or unable to support you in your old age.
Yet almost 40% of respondents in the Old Mutual Savings & Investment Monitor said their children "should" take care of them when they are old. Relying on your children in your old age will only place a burden on them and prevent them from being able to invest in their own children's future...