How Single Moms Can Build Generational Wealth
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The goal for many parents is to give their children a better life than they had. You want to know that your children will succeed and be happy even after you are gone. A great way to do this is to pass on your wealth.
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Generational wealth is about creating lasting or inherited wealth that can be passed down from generation to generation, says Ksenia Yudina, CFA and Founder and CEO of One is, an app that helps parents invest in their children’s future. “It’s hugely important because it can help close the wealth gap for the next generation,” she said. “Giving your children a financial head start sets them up for future success.”
But if you’re a single parent — especially a single mom — that can be a lot harder to do. In fact, single mothers are one of the most disadvantaged groups in the country, with nearly 30% of their families living below the poverty line, according to the US Census.
Yudina noted that with a single income household, it is more difficult to break the cycle of poverty. “Marriage has benefits including dual earners, tax breaks and the ability to split expenses,” she said. “Single mothers are disadvantaged from the start because of the gender pay gap and the fact that they don’t have a partner to help them with finances or childcare.”
These challenges can certainly seem overwhelming. The good news is that you can overcome them with a little planning.
Ways Single Moms Can Build Generational Wealth
There’s no getting around it: women have to work harder than men to generate the same level of wealth as men. Not only are women paid less, but they are often penalized for leaving the workforce to take on care responsibilities. And due to a longer average lifespan, their incomes must increase further.
So, as a single mom, your goal should be to earn extra income and invest your money in tax-advantaged accounts. Here are some ideas of things to do.
Adopt a flexible lateral activity
Getting a second job with a rigid schedule doesn’t work for single moms who have to be there for their kids after school, says a money-saving expert Andrea Woroch. “However, there are plenty of flexible side activities that you can work on as little or as much as you can when you’re free or even from home,” she said.
For example, you can sign up as a virtual tutor through Tutors.com, offer pet sitting services through Rover.com, or pick up and drop off deliveries like takeout or dry cleaning through Uber Eats or Postmates. , which you can do while running errands on the weekends, even with your kids in tow. “The extra money you bring in should be used to build wealth, whether that’s investing it or saving it for your child’s college fund or your own retirement,” Woroch said.
Acquire real estate
Real estate is one of the best tools for building generational wealth. It generally appreciates over time and comes with special tax benefits.
“Buying a property now and deciding to keep it in the family means that one day, when the house or mortgage is fully paid off, your children and/or grandchildren can either continue to rent that property or live in it. themselves without having to pay any additional costs (aside from utilities and insurance),” said Erin Ellis, Certified Financial Advisor at Philadelphia Federal Credit Union (PFCU).
Rent space in your home
Another way to leverage any property you own is to rent out an extra bedroom or livable basement to travelers on Airbnb or VRBO. That extra money can help cover bills so you have extra money to spend on savings, Woroch said. “You may feel more comfortable renting from a professional who stays longer, like a traveling nurse, or renting only when your kids are visiting their other parent,” she noted. . “But it’s a great option for increasing cash flow without missing work or your kids.”
If you don’t own or don’t feel comfortable sharing your home with strangers, other things you can rent include:
- Your car when not in use via GetAround.com
- Your parking spot through SpotHero (Woroch noted this is great for someone who lives near a popular attraction or near downtown for travelers)
- A motorhome via Outdoorsy
- Your swimming pool via Swimly
Invest in your children’s education
As higher education becomes more and more expensive over the years, Ellis said higher education in all its forms – from the traditional university, community college or even trade school – is extremely valuable in helping future generations learn and create prosperous opportunities for themselves.
“If your children are young, consider opening an education savings account for them now, so that they are well positioned when it comes time to receive additional education that could help them establish themselves professionally, and thus increase their projected salary. ,” she says. For example, you can open a 529 plan, which is a tax-advantaged investment account that allows you to save for eligible educational expenses of a named beneficiary, including college tuition. K-12, apprenticeship programs and student loan repayments.
Buy a life insurance policy
Life insurance is a way to ensure that your children will not be financially burdened if you die. You can opt for term life insurance, which lasts about 20 to 30 years and pays tax-free death benefits if you die during the term, according to Ellis. Or you can invest in permanent life insurance, which is active for your lifetime and has a cash value component (although it is much more expensive). Either way, prioritizing monthly premium payments now can help ensure your children’s financial security once you’re gone.
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