Saving for single moms can be difficult when you have one income that has to cover the household bills, children’s extras, and everyday life. It seems like it is hard enough to find money left over for yourself, let alone saving. However saving is extremely important even if you have a limited available income. Saving is important because savings allows us to be prepared in case of an emergency, provides peace of mind, helps to prevent a catastrophic loss, or credit card charges.
I recommend that you have two types of cash savings accounts.
Emergency Fund. This is a savings account where you should aim to have 6 – 9 months of expenses. This account will cover in case of a catastrophic event like a job loss. This account should cover you if your income significantly dropped or was eliminated. This is the cash cushion that will allow you to continue to pay your bills. This account should not be used for non-emergency purchases. To avoid the spending temptation, have this account in a different financial institution than your checking account.
Just in Case Fund. This fund is different from an emergency savings account because it is for smaller, unexpected expenses. This account would cover things like a flat tire, car repair, hospital visit, a broken household appliance, etc. It is for things that it would be difficult to defer, but aren’t catastrophic. I recommend that you keep $500 – $1,000 in this account. This will help to avoid charging the expense, borrowing the money, or going to a high interest lender like a payday loan facility. This money should be at the same bank as your checking account. Because it is in the same banking institution and it is easier to transfer money between accounts, you must be more disciplined with spending. This money should be used in a pinch and not to spend more.
Now that you know what type of accounts that you need, you need to understand how to save despite a lean income or limited available cash. These 3 tips will help to guide you on how to increase your savings.
- Determine how much you are spending. The key to starting to save is to understand how much your expenses are compared to your income. First, determine your essential expenses. These expenses are things like groceries, housing/utilities, insurance, and transportation. Do not forget to include your medical and other types of insurance payments, because medical costs are the number one cause of personal bankruptcy. Once you understand your bare minimum costs, use an online tool like Mint or Penny to understand how much money you are currently spending and then compare that to your essential expenses. If you use cash, save the receipts and determine how much you are spending. Once you do this, look for opportunities to reduce your spending to free up money to allocate towards savings.
- Start off small. If you find it challenging to get started, just start off with saving $25 – $50 and make it automatic. Also, look into services like Acorns, Digit, or Bank of America Keep the Change that will round up your charges and save the change. This is a low effort way to save and not notice the money. It’s amazing how fast it will add up.
- Leverage income windfalls. If you receive a tax refund, use that money to increase your savings. I recommend that if you receive a tax refund, divide it up into thirds. The first third is allocated to debt repayment. The second third is allocated to savings. The last third is allocated towards something fun. I allow myself to do something fun, because I want to avoid deprivation and to give myself a reward for sticking with my financial plan.
Hopefully you will use these strategies to increase your savings. I promise you that you will sleep better at night if you have a little something extra in the bank to cover a rainy day.
Aisha Taylor is a single mom of twins, personal financial coach, work from home entrepreneur, and #1 Amazon Best Selling Author of the book “5+5 FNPhenomenal Ways to Save $100 This Week Without Killing Your Lifestyle.” Aisha has been featured in ESSENCE and Jet Magazine. She is also the Founder of FNPhenomenal (Frugal –n- Phenomenal), a movement designed to give you the tools that you need to totally transform your finances, enjoy your life, and stop living from paycheck-to-paycheck. It’s time for you to be Financially Phenomenal!