How to invest as a single-income family

With single-parent families ever-more prevalent these days, and as more people consider taking a career break to look after the kids or study to build their skills in mid-career, an increasing number of families find themselves reliant on a single income. Once school fees, rent, medical aid and other essentials have been paid, you may feel there is little disposable income left over for savings.

But relying on one income puts you in a precarious situation as you are essentially carrying all the risk – there is no one else to buffer you should you lose your income or be faced with an unexpected medical or emergency financial commitment. Having insurance in the form of an income protector or life cover will go some way towards offering you peace of mind, but there are also investment tools like unit trusts that are able to offer you a flexible and cost-effective mechanism to build a cash reserve.

Investment monitors show that only 49% of South Africans save money – up from 33% in 2010. It’s official: South Africans are some of the worst savers in the world, with 48% of them believing that having a half-month to two-months of a salary buffer is enough. Single mothers are feeling the biggest pinch – and that means half of all mothers out there. One in two moms in South Africa lives without a partner, with only 12% of fathers contributing financially. It’s no wonder so few feel they have the options to protect their financial futures. However, it is possible.

Set a savings goal

First, you need to decide what you want to save for. As a single earner, having at least six months’ salary saved in a unit trust or other investment solution will ensure you don’t find yourself asking for handouts or getting into debt should your work situation change. So, if you currently earn R30,000  a month, your goal should  be to save R180,000. Sound impossible? It’s not. Read on. Once you have achieved this goal, you can set the next one – perhaps it’s saving for a child’s university education, saving for a deposit on a property, or beginning to contribute to an appropriate retirement solution that can offer you income when you retire. The Prudential Goal Calculator can help you easily establish how much you need to invest each month to reach the goal that is your first priority.  

Cut down on spending and repay debt

EVERY budget can be trimmed. Sit down and see where you can save money.  Aim for a minimum of R500 a month, and use this saving to repay any debts on which you’re paying high interest costs like that on retail store cards and bank credit cards. Your home mortgages and car finance, which have relatively lower interest rates, can be paid off over time. Then once your credit cards are clear, put them away and use cash going forward. If you can’t live without the convenience of plastic, however, make sure to pay off your full balances on a monthly basis so you don’t attract interest payments. Freed of your high-cost debts, you can now start growing your money by taking the next step.

Start investing

The crucial concept with building wealth starts with paying yourself every month: it should be a priority just behind the rent and groceries. Committing to invest R500 a month is a start. Adjust your spending around this. You can build your investment strategy from the ground up. As the sole earner for your family, the first step is to ensure you are financially secure with an emergency fund. A low-risk investment vehicle such as the Prudential Money Market fund can give you a way to steadily build up a reserve, with  the flexibility you need, over the shorter term (although this is not ideal for longer-term goals). Should you require access to this fund at short notice, you will be able to do so, with no penalties.

Next up, your goal may be to work towards having an income in your retirement, funding your children’s education, or even giving yourself an income cushion while you build your own business. The Prudential Fund Selector is an easy-to-use free online tool that can help you work out which fund may be the most  appropriate, no matter which goal you have.

Ready to invest with Prudential? Complete an online application form now or contact our Client Services Team on 0860 105 775 or at query@prudential.co.za for more information.