By FPA member Marina Goodman, CFP®
Last Updated: September 13, 2010
Mothers with young children are more financially vulnerable than most single people or men, especially in this fragile economy. If your husband or partner loses his job and can’t find another one soon, you and your children will suffer unless you’re lucky to earn enough to comfortably support your family. The same holds true if he becomes disabled or dies without enough insurance. Divorce also imperils mothers and their children.
Many middle and upper-middle class families, despite good incomes, have little savings, debt, and need every penny of their paychecks. They have no safety margin. They do not plan for changing circumstances, and the loss of the breadwinner’s job, or even the loss a part-time job or sudden illness, can be financially devastating.
Here are some financial defense tips for mothers, whether married or single to protect themselves as well as their families.
- Set up an emergency fund to cover six to nine months of living expenses. It should be held in a money market fund or a bank account so you can get immediate access to it. If you own your home, open up a home equity line of credit. You’ll get a checkbook, so you can simply write checks to cover your expenses during a financial emergency.
- Get your key financial and estate documents and accounts in order in case the worst happens. What would happen if you and/or your husband (if you’re married) were to die or become permanently disabled? Every mother with kids needs to have a will, and the will should designate a guardian for the children. It’s also important to have a living will, or healthcare proxy, and power of attorney. The living will lets one spouse make medical decisions for the other if he or she is incapacitated. Power of attorney lets you manage an incapacitated spouse’s financial affairs. Not only do you need the right documents, you also need to be able to locate them and know where to find the key to your safe deposit box. If your husband or partner were to die suddenly, you’ll need immediate access to money. That’s why it’s never a good idea to have all the family’s money under your husband’s name only. You’ll need adequate funds in joint accounts and/or in your name.
- Look to lower your debt and monthly costs. If you can’t pay off your credit cards immediately, put away at least a little each month so that you can eventually pay them off. You can probably cut your monthly costs with a little effort by being a smart shopper and avoiding impulse buys. Weatherizing your home will lower your heating bills, and federal tax credits can offset some of the cost. Buying a fuel-efficient car and obeying speed limits saves on gas.
- Get ample insurance. Secure disability insurance on your husband and yourself if you’re working. Also, buy life insurance on both of you, even if you’re not both working. Stay-at-home moms (and dads) make a significant financial contribution to the household, even if they don’t get a W-2 to prove it.
- Stay employable! This is most important, especially for women who stay at home full-time. If you’ve earned any professional or trade licenses, keep them up. You also may be able to work part-time, freelance or volunteer in your field. Maintain an activity among the business community that allows you to keep your resume updated, and keep up with your field through conferences, continuing education or reading. If you’re thinking of changing careers, start studying and researching opportunities now.
Time devoted to maintaining your employability is not selfish — it’s the best form of protection for your whole family.
FPA member Marina Goodman, CFP®, is an investment strategist with Brinton Eaton, a boutique wealth advisory firm in Madison, N.J.