Money Tips for Singles

Image of woman holding cash

If you're a single person, you still need to plan for the future. Do you have a will? Who will get your money when you pass away? What about retirement? Here are just a few tips for our single friends.

How prepared are you for your financial future?

Managing money and planning for the future are important for everyone, however, if you are single, there are some additional measures you may have to consider.

First, you need a contingency fund consisting of at least six-months' worth of income. Unfortunately, layoffs are an undeniable fact of economic life in America, and you need to be prepared.

Look toward the future and plan an investment strategy. By investing just $25 a month from the age of 21 at an 11 percent return (the stock market's historical average since 1929), you'd have more than $216,000 by age 61. If you are a single parent, invest with both college and retirement in mind. State-sponsored college savings plans are available (referred to as a 529 plan because of its section of the Internal Revenue Code). A 529 plan is an investment plan operated by a state, and is designed to help families and individuals save for future college costs. As long as the plan satisfies a few basic requirements, the federal tax law provides special tax benefits to you. Currently there are forty-eight states that participate.

Maintaining adequate insurance coverage is very important. Although your needs will vary according to your changing circumstances, the following recommendations are worth considering:

  • Single: Disability insurance is a good idea for anyone; however, if you are single it is vital. Disability insurance protects you against loss of income should you be unable to work due to sickness or injury. You can insure anywhere from 50% to 75% of your income. If your employer offers coverage, by all means take it, but if it covers less than 60 percent of your salary, you may want to supplement it with a policy you buy yourself. Look for one that adjusts for inflation and pays out if you're unable to work in your own occupation, not just if you're unable to work at all.
  • Older Singles: If you are an older single, you may want to consider long-term care insurance. A recent study from the ACLI(American Council of Life Insurers) suggests that single or childless individuals tend to enter retirement and nursing institutions at an earlier age than their married counterparts. Also, other studies have shown that divorced parents, especially divorced fathers, are less likely to receive long-term care assistance from their children.
  • Singles with Children: Life insurance is a valuable thing to have when there are children involved. You have to make sure there's enough money to support and educate your children should something happen to you.

Finally, a will is very important. If you pass away intestate (that is, without a will), the state you resided in would have the authority to divide and distribute your estate, including your personal items. The state would also decide who would be granted custody of minor children.