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For single women planning to start a family without the security of a second income, advisors need to come up with separate projections for each life stage.

Ivan Jekic/iStockPhoto / Getty Images

Single-parent families are on the rise, including a growing number of single women who are opting to enter parenthood on their own. Financial advisors who serve these individuals need to prepare for both potential disruptions in these clients’ financial plans and the unique stress of single parenthood.

“Being a single parent can be one of the more emotionally challenging life events,” says Bradley Eizenga, vice-president and portfolio manager with the Eizenga Lacey Kootstra Wealth Management Group at BMO Nesbitt Burns Inc. in Windsor, Ont.

He points out that clients who suddenly find themselves on their own after a spouse’s death or the breakdown of a marriage are managing their own grief in addition to that of their children. Their careers can also be at stake because they have to take unscheduled days off when their children are ill – and it can be isolating with no one to talk through the issues that come up as their family grows older.

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That’s why it’s crucial advisors go beyond simply addressing technical questions, Mr. Eizenga says. “They should share their clients’ values, understand these emotional challenges and be able to help them navigate questions related to these situations.”

There are more than 1.64-million single-parent families in Canada, according to 2018 data from Statistics Canada. Solid financial planning for this demographic requires wiggle room for unanticipated events – and an understanding that for the recently separated, finding what constitutes their new normal can take time.

Shay Steacy, head financial planner and principal at fee-for-service financial planning firm Kind Wealth in Toronto, often encourages her clients not to be too hard on themselves.

“I let them know we’ll review their cash flow and financial goals on a regular basis to ensure we get back on track,” she says.

Ideally, that review also includes their wills, registered retirement savings plans, tax-free savings accounts and life insurance policies to ensure the designated beneficiaries – often marked down as the other spouse – are still appropriate. Ms. Steacy also suggests her clients have a conversation with their children about money to ease the transition.

“If children are old enough to recognize the lifestyle they had pre-separation, it can be tough as a parent to have to start saying ‘no,’ because the new finances don’t support the same spending habits,” she says.

While maintaining the same standard of living on one income can be difficult, having a child on one’s own requires a degree of sacrifice on an entirely different level. For single women planning to start a family without the security of a second income, advisors need to come up with separate projections for each life stage.

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Christine Williston, a certified financial planner at Money Coaches Canada in Vancouver, had a successful executive approach her a few years ago for help in realizing her dreams of motherhood as a single woman. Ms. Williston then came up with five cash-flow scenarios for each stage of the process the client would go through.

“These included leading up to the pregnancy, during the pregnancy, while she was on maternity leave, when she went back to work and the child was not yet in school, and when the child would go to school but still needed child care at some level,” Ms. Williston says.

“After all that, we put together a scenario for her retirement. She made a very good income, but she really wanted to make sure she could support and educate a baby on her own while also being able to look after herself later [on in life],” she adds.

Ms. Williston and her client worked together for several years in preparation.

“Throwing money away on interest is not a great way to start, so we cleaned up her previous debts first, then started saving for in-vitro fertilization (IVF), which in and of itself is an expensive proposition,” she says.

The client budgeted $20,000 to cover the associated costs of IVF but had to withdraw more from her savings to cover the unanticipated expense of a second round of IVF after the first one failed. The realization that her maternity leave wouldn’t cover her expenses meant having to save an extra $1,500 a month, plus enough to buy a car, which the client didn’t have when she and Ms. Williston first met.

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“As a solo parent with no one else to rely on, not having a car just wouldn’t be feasible for getting groceries and doing day-care drop-offs. Life was going to be extremely expensive in the early years and she wouldn’t be able to save any money for retirement,” says Ms. Williston, who advised the client to use a registered retirement savings plan to save for maternity leave, then draw the assets out of it when she was at home in a much lower tax bracket.

“The retirement projection I came up was pretty modest, so she knew what she was getting herself into. But she said she was fine with it and this is what she wanted – and I really respected that.”

Ms. Williston believes advising single women who choose to become moms on their own could evolve into a specialty in financial planning as this demographic continues to grow.

“There are a lot of complex and multifaceted needs to consider and some quite dramatic changes – from being a high-earning professional to a low-earning single parent and then back to high earnings with lots of expenses. All that in three years makes for quite the life change roller-coaster,” she says.

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