Money matters for single parents
Wednesday, 9 September 2020
Perhaps there were years of rumblings that led to an eventual split, or maybe it happened literally overnight.
But before you knew it, you were drawing up divorce papers. No matter how your relationship ended, money matters more than it ever did before when you go from being a full nuclear family to a single parent. When you're married, your spouse generally serves as a safety net to get you through the hard times, like a lay-off or drop in business. But when you're single, your mindset—and spending habits—must make a shift.
Face your new reality
"I would definitely encourage people to reflect on their values in terms of what's important and spend your money according to your values," says Shannon Kolakowski, PsyD, a clinical psychologist and author of books including Single, Shy, and Looking for Love and When Depression Hurts Your Relationship. "It's easy to spend money on frivolous things or overpriced items that don't have any real long-term value," she says. Instead, it's smart to give yourself time to sit down and think about short- and long-term goals for yourself and your family, and put your financial efforts towards those goals.
Even though you might be worried—or downright scared—about money now that you're on your own, be smart about understanding your financial reality and make good choices. Don't go into denial. "That will make you feel more emotionally secure than if you're just getting by and trying not to think about it because it's too overwhelming," Kolakowski says.
Define your values
If things like education and travel are important to you, focus your saving and spending efforts in these areas, and have conversations with your kids about family priorities so they understand why you're making these decisions. Explain that if you eat at home instead of going to a restaurant, you could be putting $75 more into a vacation fund.
Find out how your divorce affects your taxes
According to TurboTax, newly-divorced parents need to pay attention to certain areas of the tax code that may change along with their marital status. Ways to help your tax burden include:
- File as the head of household: You'll generally get a lower tax rate.
- Establish qualifying dependents: Be clear on who gets to claim the children each year. Sometimes parents alternate depending on their agreement.
- Claim the dependent exemption: This can help beef up a refund for single parents below a certain income threshold.
- Include the child tax credit: This $1,000 credit is eligible for parents making $75,000 or less.
- Deduct child care expenses: Some—maybe even all—of daycare expenses for children ages 12 and younger can be deducted.
Don't pass along your anxieties
Kolakowski warns that if you're having money troubles, the one thing you don't want to do is plant seeds of worry in your children's minds. For example, if you need to make a choice between paying off your credit cards and paying for college tuition, don't make it seem like you're jeopardizing the family's security. You can allude to something in a truthful, non-alarming way, such as, "I can offer a little help on your tuition, and we'll work together to find the best loans and scholarships for you."
Likewise, if you and your ex don't agree on child support, alimony, or how money should be spent, the children should not be privy to those conversations. "Especially if your financial position changes after the divorce, try to talk about money in a positive way and talk about saving in a positive way," Kolakowski says.
"There definitely is value in striking that balance and explaining some of the purchases—and the value of money."
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
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