Saving for Retirement as a Single Parent

Saving money is tough work. As a financial adviser for more than 28 years, it seems that no matter how much money people make, they feel they don’t have enough to put any into savings — even people with high discretionary incomes often appear to fall into this mindset.

If it’s tough for even the wealthiest people to save, it may seem impossible if you’re trying to raise children on your own. But I don’t think it is. I think most people can find some money to put away for retirement. And I think that neglecting to save for retirement is one of the biggest financial mistakes you can make. But how to begin when every penny is precious? Here are a few suggestions:

Start small. Save what you can. Even if you put aside just $10 a week, you’re making progress toward a goal. You’re getting into the habit of saving, and you’re helping that money grow.

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Think in terms of three buckets. Split your income into three portions. One portion goes into a bucket you can draw from for your family’s immediate needs: food, housing, medical costs, etc. Put money for mid-term goals — like your children’s college education — into a second bucket. And put another share into a third bucket that will support your long-term goals, like retirement. There may be times when you need to put more money in one bucket than another, but strive to always contribute to each bucket.

Take advantage of tax-favored accounts. You could use IRAs or 401(k)s to help grow your retirement savings and save on your current tax bill at the same time. And if you are fortunate enough to work for a company that matches your contributions, it helps to save much as you can. If your employer will match your contributions up to 5%, then it makes sense to find a way to put in 5%. It’s like free money.

Once your kids can contribute to their future, let them. When it comes to saving for college, I believe most children want to participate in the effort. They should, because it’s their cause, and their future. Many people I know, myself included, worked during their college years. My mom could have given me the money I needed for college, but instead she said, “Don’t rely on me for money anytime you want it. I’m not an unlimited source of cash that drops down from the sky — but I am your safety net.” I think my mom’s philosophy about money taught me responsibility, and reaching my goals felt more fulfilling because I had to sacrifice in order to obtain them.

Don’t budget. Commit to saving. After all these years of working with people and their finances, I’ve decided that I don’t believe in budgets. Trying to cut back on things you want to do usually doesn’t work (unless you’re trying to cause family arguments). Instead, I suggest you decide to save a certain amount each month, and then just do it. You'll automatically buy or do less. It’s not easy, but I’ve seen it work time and time again. Somehow, once you’ve made the commitment to save, it’s like the universe conspires to help you succeed.