Last updated on November 2, 2023 by Lori Pace
Are you a single mom trying to juggle daily expenses, your children’s needs, and long-term financial goals? Does it feel like walking a tightrope, balancing your family’s current needs with your future dreams?
Welcome to the club—a group of resilient single moms who not only survive, but master the art of thriving.
You may be underestimating a secret weapon in your financial arsenal: life insurance. It’s more than just a safeguard against life’s uncertainties; it’s a powerful tool for growing wealth.
Learn about life insurance
While some may view it as an expense, life insurance can also help you survive financially. If used correctly, it can be an effective tool for economic growth.
For life insurance, the company promises to provide a death benefit to the beneficiary upon the death of the insured in exchange for premiums paid by the policyholder. The core part of this contract is the face amount of the life insurance policy. This is the death benefit or the amount of money an insurance company guarantees to a beneficiary upon the death of the insured.
Life insurance comes in many forms, the most common being term life, whole life, and universal life. Term life insurance provides coverage for a specific period of time, with coverage ending if the insured survives that period. In contrast, whole life and universal life insurance provide lifelong coverage with a cash value component that grows over time, turning your policy into a potential investment vehicle.
Achieve financial growth with life insurance
Life insurance, especially whole life insurance and universal life insurance, offers unique investment benefits that can help single moms like you navigate the financial landscape with more confidence.
Accumulate cash value over time
Whole and universal life insurance policies contain a cash value component. This cash value grows over time. In turn, it creates a pool of funds that you can tap into for various needs. Maybe you’ll use it to pay for your child’s college tuition, a down payment on a house, or an unexpected medical expense. You might even want to use it for stock market investing, such as buying shares from Facebook, which has more than 2.989 billion monthly users, or Twitter, which has more than 237.8 million daily active users. However, it is important to note that borrowing money from a life insurance policy, if not repaid, will reduce the death benefit and may incur interest charges.
Enjoy tax benefits
Don’t overlook the tax benefits of life insurance. The cash value of a whole life insurance or universal life insurance policy grows tax deferred, which means you don’t have to pay taxes on the gain as long as the money remains in the policy. Additionally, the death benefit your children will receive is tax-free. This can give single mothers peace of mind knowing their children will receive the full benefit without deductions.
Get loan options
Life can be unpredictable, and financial emergencies can happen when you least expect them. Whole and universal life insurance and online loans allow you to borrow against your cash value, giving you quick access to money when you need it. There is no credit check and this amount is only deducted from the death benefit if you are unable to repay the loan. As a single mom, this feature can be a financial lifesaver and provide a safety net that is always available.
potential dividends
If you have a participating whole life insurance policy issued by a mutual insurance company, you may receive dividends. These bonuses, while not guaranteed, can be used to purchase additional insurance, reduce your premiums, or even be given as cash. This potential return can fuel your financial growth.
Choose the right life insurance policy
As a single mom, it can sometimes feel like the weight of the world is resting on your shoulders, and choosing the right life insurance policy is part of that weight.
Assess your financial situation and goals
Start by honestly assessing your current financial situation, expected income, living expenses, and future financial goals. Understand your assets, debts and potential future expenses, especially those related to your children. This assessment forms the basis for deciding which policy is best for your situation.
Consider your child’s age and needs
Your children’s ages and needs will greatly influence your life insurance policy selection. For example, if you have young children, you may want to choose a policy with a larger face value. It can help ensure their care and education are safeguarded should something unfortunate happen. On the other hand, if your child is older and financially independent, smaller coverage may be enough.
Consider your age and health
Your age and health play a critical role in determining the type of life insurance policy that is best for you and its cost. The younger and healthier you are, the more affordable your premiums are usually.
Research and compare policy
Don’t rush into choosing life insurance. Take the time to shop around. Compare policies from different insurance companies, focusing on features such as face amount, premium, cash value growth rate, and loan period.
Seek professional guidance
Life insurance can be overwhelming. Therefore, it may be helpful to seek advice from a trusted insurance advisor. Additionally, take advantage of online resources designed specifically for single moms. These platforms can provide valuable insights, comparisons and guidance to help you find the most suitable policy.
Other tips for investing wisely as a single mom
Life insurance is a key component of smart investing and financial planning, but it shouldn’t be the only tool. A comprehensive investment strategy involves a combination of different assets that work together to secure your financial future.
Diversify your investments
The golden rule of investing is diversification – this is equivalent to not putting all your eggs in one basket. This strategy involves spreading your money across a variety of investments to reduce risk and potentially increase returns.
Establish and maintain emergency reserves
As a single mom, you are the captain of the ship and it is crucial to be prepared for any storm you may encounter. An emergency fund serves as a financial buffer to deal with unexpected expenses such as car repairs, home maintenance, or medical bills. This safety net can keep you afloat during challenging times, ensuring you don’t have to dip into long-term investments or rack up high-interest debt.
Prioritize retirement savings
Your golden years may seem far away, but the sooner you start saving for retirement, the more time your money has to grow. Whether it’s through an employer-sponsored 401(k) plan, an Individual Retirement Account (IRA), or other retirement savings options, saving for retirement can be beneficial.
Educate yourself on personal finance
Understanding different investment options, understanding how taxes work, getting the hang of budgeting and saving, and understanding your rights as a consumer can all greatly benefit your financial journey. There are plenty of resources online and offline to improve your financial knowledge.
regular financial review
Just like you schedule regular health checkups, your finances need to be reviewed regularly. Take time every few months to evaluate your financial situation. Review your income, expenses and investments. Do you need to adjust your budget? Are your investments performing as expected? Regular reviews help ensure your financial plan is on track, allowing you to make adjustments as needed.
in conclusion
Financial planning as a single mom can be challenging, but it’s not impossible. By taking advantage of life insurance, you can build a strong financial foundation for your family. It provides a safety net for your children and serves as an investment vehicle for your financial growth.
