Single-parent Income? Simple Tips For Investing On A Tight Budget

I bet many single mums and dads out there know living on a single parent income can be tough. 

When money is tight, investing is likely to slide to the bottom of the financial priority list. 

“I know I should be investing but hey, I’ve got bills to pay!”

If this situation sounds familiar, it’s time to really commit to finding ways to make investing a priority.

Firstly, let’s kick off with a few quick tips on saving money when you’re on a very lean, single-parent income. 

These tips might not be ground-breaking, but trust me, if you implement them, you will see a boost in the amount you can save each month. 

So often we know what we need to do or what we can change…..but we just don’t do it. 

8 simple tips for saving on a single parent income

#1 – Watch the energy use. It sounds so simple but you’d be amazed at how much heating/cooling, having all the lights on and electronics powering 24/7 can cost. 

#2 – Shop for groceries with cash only – Without a card, you won’t be tempted to overspend on those ‘extras’ at the checkout. 

#3 – Do the 52-week money challenge - This is a fun one to do with the kids – it makes saving a game!

It works like this – 

Start by saving $1 the first week of the challenge into a jar. Week 2 save $2, week 3 save $3…and so on until week 52. By then end of the year, you’ll have socked away $1378 for investing!

Some people do the challenge in reverse too, to get the larger sums out of the way first.

#4 – Review every recurring expense – Recurring expenses, especially small ones, are easy to forget… and if you’ve forgotten about it, do you actually need it? Review your bank statement and cut where necessary.

#5 – Challenge yourself to three meatless dinners a week – Not eating as much meat is a simple way to spend less on groceries in general.

#6 – Use the 30-day rule – Impulse purchases aren’t helping your investing goals. For larger, non-essential purchases and gadget upgrades hold off for 30 days. It’s like the ‘cooling-off’ period in reverse and gives you time to decide if it’s really worth buying. 

#7- Invest your tax return – When funds are tight, your tax return can make a big difference to your financial future if you’re smart about how you use it. 

#8 – Change providers – Complacency can cost you money. Just because you’ve been using the same supplier for the last 10 years, doesn’t mean they’re the only option. Shop around for the best deal compared to your existing plan; a little time spent researching could save you hundreds of dollars!

Ideas for investing on a single parent income

Ok, now let’s dive into a few investment options that don’t require serious sums of cash to get started.

Exchange-Traded Funds – minimum $500 to get started 

Exchange-traded funds (ETFs) are a smart option if you have limited funds to put towards investing. 

Buying ETFs allow you to own a single investment that covers a large number of assets and provides diversification. You’ll receive returns that contain both income and capital growth.

ETFs track an asset or market index and fluctuate in value depending on the market or index they are tracking. The great news is that you can invest in ETFs that track various property markets, including residential, commercial or both.

It’s a great way to get started in property when you don’t have the capacity to save for a deposit.

You can find an ETF for almost anything that you want to invest in! 

Investing in ETFs means you’ll also avoid the higher management fees that come with buying and selling individual shares. 

ETFs are also a great option for the beginner investor!

Consider a regular investor plan – minimum $500 to get started 

On a single income, it should be easier to commit to investing smaller sums more regularly than making big, lump-sum contributions. Many banks and financial institutions offer regular investor plans to help you do exactly that. 

After an initial investment, usually, $500 – $1000, a recurring withdrawal is set up from your bank account and invested into your portfolio. 

If you invest in the same property ETF you effectively are using Dollar Cost Averaging. This is where your effective entry price is the average price you have paid for all purchases. Proponents of this method believe it is a good way to smooth out the ups and downs of the market. 

An investment plan is a pretty painless way of making small contributions to your portfolio consistently. It’s a smart financial habit that will pay huge dividends over time.

Dividend Investment – minimum $500 to get started

If you’re committed to playing the long-game when it comes to creating financial freedom, dividend investing is one path to consider.

Dividend stocks distribute a portion of the company’s earnings to investors on either on a monthly, quarterly or yearly basis. Dividends are commonly paid in the form of cash distributions to the shareholders.

Let’s say you have 10,000 shares of Company X, which pays six-monthly dividends. 

The dividend per share is $0.15 which equals an annual interest payout of around $1,500. If you re-invest those dividend payouts back into the company or ETF in this case, over time they’ll generate more dividends of their own. The magic of the compound effect.

Again, this is a great advantage of getting started with property ETFs. You get the capital growth and the income from dividends that you can reinvest to snowball your results.

The bottom line?

Don’t let only having a small amount to invest stop you. Even on a single parent income, any amount is better than nothing at all! Taking action, no matter how small it seems, is a step towards a more secure financial future for your family.

What do you think, is this something you can get started with today?

Andrew Woodward is a mindshift.money accredited money coach based in Sydney who teaches people to take control of their money and invest for their future, simply and efficiently. Sign up for his free weekly money tips at theinvestorsway.com.au.