Life insurance and financial tips for single parents

Should a single parent get life insurance?

Life insurance is crucial for single parents who bear the primary financial responsibility for their children. It can provide a safety net by replacing lost income, paying for funeral costs, covering debts like mortgages or loans, and funding future expenses such as childcare, education, and daily living costs.

 For example, if a single mother, the sole provider for her two children, were to pass away unexpectedly, life insurance could cover her children's daily expenses and education costs. Without it, they may struggle financially. Similarly, a single father with a mortgage and outstanding debts would need life insurance to help his children to continue living in their home without financial strain. 

 In both scenarios, life insurance offers peace of mind by safeguarding the children’s futures and maintaining financial security. Experts recommend purchasing at least 10 times your annual income in coverage.¹ A financial professional can help you determine the appropriate amount based on your personal and family situation.

 Note: Since life insurance can’t be paid out directly to minors, it’s wise to name a trust as your policy’s beneficiary. 

Financial considerations for different single-parenthood situations

Financial considerations for widows

 Losing a partner is a significant emotional and financial challenge. As a widow, you may need to address several specific financial concerns:  

• Accessing life insurance benefits – Make sure you have all the necessary documentation to claim life insurance benefits promptly. 

• Review joint accounts – Transition joint accounts and financial responsibilities to your name. 

• Social Security benefits – Find out if you’re eligible to apply for survivor benefits through Social Security. 

• Debt management – Assess any outstanding debts and create a plan for managing them. 

• Investment reassessment – Consider reassessing your investment strategy to align with your new financial circumstances and risk tolerance.  

Financial considerations for divorcees

Divorce often brings about a significant change in your financial circumstances. Here are some key considerations for managing finances post-divorce:  

• Child support and alimony – Ensure that child support and alimony arrangements are legally documented and followed. 

• Splitting assets – Work with a financial advisor to fairly divide marital assets, including retirement accounts and property. 

• Credit score – Monitor your credit score, as divorce can impact credit if joint accounts and debts aren’t managed properly during the separation, leading to missed payments or increased debts. 

• Legal fees – Be mindful of legal fees and other costs associated with the divorce process and how this can affect your expenses. 

Financial considerations for those choosing single parenthood

 Choosing to be a single parent is a proactive decision that requires a thoughtful financial strategy:  

• Savings plan – Establish a robust savings plan to cover both expected and unexpected expenses. 

• Childcare costs – Budget for childcare costs, which can be a significant expense for single parents. 

• Work-life balance – Consider the financial implications of your work schedule and potential need for flexible work arrangements. 

• Future planning – Plan for long-term goals, such as your child’s education and your retirement, with the help of a financial professional. 

Seeking guidance from a financial professional

No matter how you became a single parent, a New York Life financial professional can be a reliable resource to help guide you in managing your finances effectively—and tailor steps for different single-parenthood situations: 

Revise your estate-planning documents

Estate planning is essential for all single parents to make sure your assets are distributed according to your wishes. Widows should update their will and other estate-planning documents to reflect the loss of their partner, including changing beneficiaries on IRAs, 401(k)s, and insurance policies. You may also want to update any powers of attorney or health directives. 

Divorcees need to ensure that their estate documents reflect their new marital status and update beneficiaries to remove their ex-spouse if necessary. Single parents by choice should create or update their will and appoint a guardian for their children, if they haven't already.

Purchase life insurance or update your existing coverage

Purchasing life insurance or updating your existing coverage can help you protect and secure your children’s future. Widows should review their current life insurance coverage to ensure that it meets their new needs and provides adequately for their children. 

Divorcees must reassess their life insurance needs post-divorce to ensure that they have sufficient coverage, especially if their financial obligations have changed. Single parents by choice should determine the right type and amount of life insurance to cover future expenses for their children, including education and daily living costs. 

 Work with a financial professional to help you find the right type of life insurance to best suit your family’s goals and needs.

Review all of your financial documents

Understanding your financial situation is key to effective financial management. Widows should transition joint accounts to their name and review all financial documents to get a clear picture of their assets and liabilities. Divorcees should make sure all joint accounts are appropriately divided and review their financial documents to establish their new financial baseline. Single parents by choice should regularly review their financial documents to make certain their savings and investments align with their goals and responsibilities.

 If taking on the family finances is a new role for you, don’t be afraid to ask for help if you need it—whether it’s from a friend, a relative, or a financial professional.

Create a budget

To stay on top of how much money you have coming in and going out, draw up a budget. This should include building up an emergency fund if you don’t have one. Emergency savings are critical, as single parents don’t have a partner to rely on for added financial support. Aim to save at least three to six months’ worth of living expenses to cover unexpected costs or emergencies.

Take care of yourself and your family

Every new decision you make as a single parent should focus on providing a stable life for your kids. With the right knowledge and guidance, you can become more financially secure and safeguard your family's well-being.