A Single Mother’s Guide to Digital Banking

Creating a financially stable home can be a challenge for single mothers. Time is at a premium, and it’s expensive to raise children on one income, even with child support. Statistically, female parents without partners fare worse than their male counterparts. According to the latest data from the Pew Research Center, single dads are 24% likely to be living at or below the poverty line, while 43% of single moms live at or below the poverty line. 

If you’re a woman who is raising kids on your own, digital banking with online savings accounts or even investing can come to your assistance. From making the most of your financial institution’s website to downloading and using the right apps, you can free up precious hours to spend with your child while you save, invest, and borrow money efficiently and safely. Single moms: here’s your guide to the wide world of digital banking.

Save Money Automatically 

When cash is tight, setting money aside can feel impossible. There are ways to do it, though. Start by making your savings a priority. Securing a positive net worth will put you in a position of strength, and the more money you have tucked away, the less you’ll have to worry if or when expected and unexpected expenses arise. Digital banking can help simplify the process of saving money and kick you out of a rut.  

“Living paycheck to paycheck feels like being on a hamster wheel,” says Sonya Smith-Valentine, Esq., a financial expert and president of Financially Fierce. “You feel like you’re going round and round with no end to your financial problems in sight. However, it is possible to begin to get off. You can start with something as simple as $1 a day, a week or a month, just as long as you get started. It will add up.” 

Consider opening a savings account at an online bank. The account you use for regular expenses needs to be separate from the one you’ll use for savings. If the funds are merged in a checking account, it’s easier to spend it all. While you can open a savings account at any bank or credit union, consider a financial institution that doesn’t have a physical presence for consumers. Online banks operate with low overhead, which gives you an advantage. 

“Some online banks like Ally often offer high interest rates on savings accounts, so your money can work harder for you,” says Smith-Valentine. 

An online bank’s savings account may offer a rate of 2.25%, for example. If you scrape together $500 for the initial deposit, and then deposit $300 every month, you will accumulate $4,155 in twelve months. A traditional bank might only offer .01% as a return, so your ending balance would be $4,100. The $55 difference at the end of the year isn’t huge, but it may be enough to cover an essential utility bill or movie tickets for you and the kids. 

Shop around for a high-yield online savings account, but make sure you keep a close eye on the potential requirements and costs. Some accounts require a minimum deposit, charge a monthly management fee or penalize you if your balance falls below a certain amount. As a single mom, every dollar counts, so choose carefully.

BankSavings APYMin. depositFees
Ally1.60%$0$0
Synchrony1.70%$0$0
Chime1.60%$0$0
Vio1.85%$100$0
Varo1.92%$0$0
FNBO Direct1.70%$1$0

Nearly every financial institution has an online banking system you can use to pay your bills and transfer funds from one account or bank to another. Determine a feasible amount to set aside monthly, then have it transferred automatically. Have the money shifted from your checking account to savings on the date you get paid, so you don’t have time to see (and spend) it. 

Once your savings account is up and running, manage it according to your personality. Conduct a monthly check-up if watching the funds grow will motivate you to keep saving more when possible. On the other hand, if seeing all that money sitting there is too tempting, let the account sit without your interference for at least a year. 

Budgeting Techniques with Tech  

You’ll have to know how much money you need to spend to keep your household in shape to avoid spending more than you should. The total amount of your expenses, including the amount you’ve set aside for savings, needs to be less than your income. 

Finding the time to construct and manage a budget is hard, which is why Smith-Valentine suggests using apps like Mint or You Need a Budget (YNAB). Other excellent budgeting apps include Digit, Qapital and Medean. There are tons of personal finance apps available, and they can help you organize your expenses and identify the areas where you can reasonably reduce your spending.

The best free budgeting apps

  • Mint: best for simple budgeting and tracking spending
  • PocketGuard: best for setting spending goals
  • Clarity Money: best for AI-powered trend data
  • Goodbudget: best for synching across multiple users and accounts
  • Qapital: best budget-tracking checking account

Budgeting apps are perfect for single moms because they do the hard work for you. Once you enter your financial information into the program, the app kicks into action. A budget will be created and you’ll be able to track your progress. Everything will be in one place, and you can keep tabs via your computer or mobile device. 

Most of these apps will supply you with information about your credit cards, such as your balance and available credit limits. They analyze your spending habits and provide tips on how to improve your situation. Some apps, like Mint, will also track your credit score, which is useful when you want to apply for a new credit card or loan. Many of these apps have reminders for due dates on bills, so if your hectic lifestyle has resulted in late payments (and a low credit score), such prompt can keep you on track. 

Even better is that most of these budgeting apps are free. If you veer off the basic platform and want access to the premium functions, like regular credit score updates, there may be a fee, but you may find that you’re fine with the basic functions. 

Invest with Analytics

Having money in a savings account will help out in emergencies and facilitate the purchase of something you want or need, but properly investing your savings will build wealth, too. According to a survey by the digital investment platform Wealthsimple, only 26% of women in the millennial group invest outside of their employer-sponsored retirement plan, yet 43% of men the same age do. 

Part of the problem, says Smith-Valentine, is that women tend to have less confidence in their investing abilities. “It’s sad because women often do better than men when we do invest,” she says. “Single moms need to think about retirement just as much as the rest of the population does. Social security is not guaranteed, and none of us can borrow our way through retirement. They also don’t have the benefit of a spouse’s retirement savings to help them later in life.” 

Consider stepping up and taking part in the market. Learn the fundamentals of investing and how technology is making it easier and safer for single mothers to put money into invest. 

  • Stocks: Stocks are securities. The shares you buy represents a portion of ownership in a company. When the company performs well, the value of your stock increases and you can sell at a profit. If the value of the stock falls, you can hold onto it until it (hopefully) rebounds and increases, or sell at a loss. 
  • Bonds: Bonds are loans. When you buy them, you become the lender and you will earn a fixed amount of interest. 
  • Mutual funds: Rather than purchase stocks and bonds individually, you can open a mutual fund. These professionally managed funds pool your money with other investors, resulting in a collection of securities and bonds. This way your holdings are diversified, which minimizes risk. 

If you have an employer sponsored retirement plan, such as a 401(k) or 403(b), you likely have a choice of mutual funds. Some are high risk, high reward, while others are the opposite. The younger you are, the more risk you can take (within reason), but as you reach your retirement years, you’ll want a portfolio comprised of investments that aren’t so volatile. Taking advantage of these plans is wise, particularly if your employer matches your contributions. After all, how can you turn down free money? You won’t be taxed on the earnings until you start to make withdrawals. At that stage you’ll be retired, so you should be in a lower tax bracket.  

If you will be investing your money outside of a retirement plan, you can open a brokerage account at a financial institution and work with a broker to buy and sell your holdings. Doing so can be time consuming and the fees they charge can be steep, so in lieu of that, consider turning toward technology — and robo-advisors. 

Robo-advisors are computer algorithms and software that can create and manage tailored investment portfolios. In fact, women-owned, female-focused companies like Ellevest were created with you in mind. 

With Ellevest, you can set your own financial goals, and it will suggest the amount you’ll need to contribute to meet it. It’s designed with women in mind, and will develop an investment portfolio based on your income, risk level, age and other factors so you can hit your unique target.

PlatformPricePremium PriceRobo-, Human-, or Self-Directed?Min. Deposit
RobinhoodFree$5/monthSelf$0
Betterment0.25%/ year0.40%/ yearHuman-Directed$0
Wealthfront0.25%/ monthN/ARobo$500
Acorns$1/month$2–$3/monthHuman-Directed$0

Borrow Intelligently with Digital Banking

Taking out a loan under the right circumstances can help you get ahead and improve your life. 

“Acquiring a mortgage for a house is a good thing as long as you aren’t buying a house you really can’t afford,” says Smith-Valentine. “Borrowing for college is good as long as the degree is in a field where you’ll be able to make enough to pay back the loans.” 

Other positive reasons to pursue a loan might include buying a reasonably priced car or starting a business.

Review all of your loan options online and compare the different offers. The one with the lowest interest rate will result in the lowest total cost. Don’t apply until you’ve identified the best loan for which you’re likely to qualify. 

If you’re struggling to qualify for a traditional loan or can’t come up with a down payment on a house on one income but want to buy a home, look into FHA loans and USDA loans. These loan programs are backed by the federal government and are easier to obtain than other mortgages. 

FHA loans are ideal for people who have lower credit scores or can only afford a smaller down payment, and USDA loans are geared toward lower income buyers who live in certain rural areas. Both programs offer down payment assistance in some cases, and it can pull that out of reach mortgage loan into accessible territory. 

Whatever amount the loan is for, make sure it won’t vastly impact your budget. Schedule the payments to be deducted from your checking account a few days before the due date so you know they’ll arrive on time.

Use credit cards as short-term payment tools for the things you need, and only charge what you can afford to pay in full within the interest-free grace period, which is generally about 30 days. Your budgeting app should help with this. Charging regularly and deleting the balance every month will drive your credit scores upward and ensure that you won’t drown in expensive debt. 

There may be times, of course, when you want to finance a large purchase with a credit card, such as a new appliance, but those decisions should be rare and approached with a payoff plan in mind. Treat the balance as a loan, with fixed monthly payments that you have scheduled to be deducted from your checking account. 

The key to keeping costs down when borrowing money, either with a loan or credit card, is to borrow as little as possible in order to pay it back in full and increase your credit score. Paying back bills and loans on time and in full will help improve your credit score, that way you’ll be eligible for lower interest rates. If you’re a single mom and are new to credit, you can start small to build your credit rating. 

Secured credit cards are excellent for this purpose. You can use some of your savings to put down as a deposit, and the issuer will usually grant you a credit line that matches it. Make small charges once a month and pay the balance in full so you’ll have a well-managed account that’s working to improve your credit history and credit score. The cash held as security will be returned to you when you close the account with a zero balance, though some issuers will release the funds and convert the account to an unsecured card after a certain number of on-time payments.  

Whatever type of credit card you get, be sure to check your activity online, and check it often. You’ll want to see a running total of your charges. Stop charging when you’ve reached your personal limit, not the card limit. 

Protect your Information When Banking Online

Whatever type of digital banking you do, it’s crucial that you apply online safety measures. As a single mom, your schedule is likely busy as it is. The last thing you’ll want to do is spend additional time mending the damage a hacker can cause. Follow these easy tips to stay secure.

  • Create secure passwords: Mix upper and lower case letters, toss in a few symbols and use random words. “jenny123” is weak. “#toAst$lipglosS4” is strong. Change your passwords often. 
  • Log out: When you’re done with your banking business, hit the “log out,” button. Don’t just close the browser or exit the website. 
  • Avoid saving passwords: Having the passwords instantly available may be convenient, but if your computer or mobile device is lost or stolen, the person who took it can access your online accounts. But even if the item never leaves your possession, savvy hackers can still gain access, so make sure to type the passwords in every time instead. 
  • Make sure your bank uses two-factor authentication: Most do, but make sure you ask. Two-factor authentication is when you enter your username and password and are then prompted to provide another piece of information, such as the name of your first pet or favorite hobby. 
  • Be wary of email correspondence: It’s astonishing how convincing a phishing email can be. One that appears to be from your bank and is asking you to send your personal or account information should be immediately suspect. Delete it and contact your bank using the legitimate website to find out if they needed something from you. 
  • Never conduct banking business using a public Wi-Fi network: Free is fabulous, unless it’s a hotspot where you’re making a credit card payment or checking your portfolio’s performance. Public wireless networks in libraries, schools and cafes are convenient, but they are not secure. Another person can tap into it — and then tap into your account. When banking on the go, use a virtual private network, which will allow you to establish an encrypted connection.

As a single mother you may face hurdles on the path to financial wellness, but by using technology the right way, odds are you can clear them. Maximize digital banking tools and integrate them into time-tested methods of smart saving, budgeting, investing and borrowing. 

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