I’m a single mother, making $63,000 before taxes. I have a 13 year old child, no retirement savings, living paycheck to paycheck. What advice do you have for me? What kind of life insurance should I have?
Being a single parent in a high cost area is a real challenge but studies have shown that it doesn't really matter how much you have, it's what you do with it that counts. As a Certified Financial Planner for the past 12 years, I have seen many different client situations. Being single myself, I know the importance of saving for retirement. A good “rule of thumb” is to have six months of living expenses (home, auto expense, groceries, electricity, etc.) saved in an “emergency account” at your bank. It may take awhile to build this up, but that’s the first step.
Once you have an ample emergency account, you should then look into insurance. Based on the limited information provided and given your limited resources and significant need, I would recommend term insurance for you. If your child is thirteen, you may want to buy a ten year policy. A good rule of thumb is to buy about eight times your earnings, or for you, about $500,000. All or part of this may be available from your employer, but if it isn't, you can buy it on your own. You only need insurance for as long as your son depends on you. You'll be surprised how inexpensive term insurance is.
After these two steps are done, then saving in an IRA, Roth IRA or a Retirement Plan at work would be advisable.
This takes some dedication and focus on the goal. Remember, it doesn’t happen overnight.
I hope this is helpful to you and I wish you the very best.
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