Planning your financial life as a single woman and a mother

Divorcing parents often split their assets 50:50, but the parent – typically the mother – who is the primary caregiver ends up paying most of the children’s ongoing expenses.

This is what financial planner Christel du Toit highlighted recently at an Allan Gray workshop on the intricacies of marital property regimes and the realities of divorce.

Du Toit is the author of the book Divorce Smart: The Girls Guide to Divorcing Well. She is the managing director of Finsmart Asset Management, and she specialises in assisting divorcees rebuilding their finances and achieve financial freedom. Her business is inspired by her own experience of a divorce several years ago.

Du Toit says divorce can be planned for but should have a focus on not destroying the wealth that has already been accumulated.

Analyse expenses carefully for maintenance

Du Toit advises that divorcing spouses carefully analyse the children’s expenses so that agreed maintenance payments truly reflect all the expenses. The primary caregiver - often the woman – typically ends up paying for 75 percent of the children’s expenses.

Du Toit says that when maintenance is calculated often the basic monthly expenses, such as food, school fees and extra-murals from the couple’s normal monthly budget are considered.

However, other items that may not come monthly but once, twice or multiple times a year, and are not reflected in the couple’s normal budget, can be problematic.

Mothers will often pay for small extras such as school trips, money for the tuck shop, stationery, textbooks, sports gear and clothing. If these are not considered for the purposes of maintenance payments, it can place undue pressure on a mother who is the children’s primary caregiver.

Thought should also be given to rising costs of education for the children as they get older. The school fees that are payable for children in creche/nursery school are much lower than those payable for primary school, high school and university.

Depending on the custody and living arrangements, mothers may be under pressure to handle tasks that the father used to assist with. If the mother needs to work, she may need to engage private transport for the children to and/or from school and even additional daycare and domestic support.

Make a realistic budget for maintenance

Mothers going through divorce need help putting together a realistic budget for the purposes of the maintenance agreement, Du Toit says. She will also assist them in mapping out their assets for the purposes of the division of the estate and the accrual calculation. The mother then has the best possible information to take to her divorce attorney to assist in the negotiations.

During a major transition such as divorce, the main focus is often adapting to and surviving under your new circumstances. Major priorities like savings, investments and insurance are often put on the back burner.

It is very important that a divorced woman gets her financial house in order, and that she and her children are protected through the appropriate savings, short-term and long-term insurance and that her journey to financial freedom is firmly on track.

Why divorcees should pay attention to their wills

A divorced mother’s last will and testament is also vitally important for protecting her minor children’s future interests. In most cases, should a mother pass away: the father is the natural guardian of the minor children and he will be expected to care for them and manage their finances.

In this scenario, the father would be the signatory on any investments, savings and bank accounts in the name of any child under the age of 18.

The father would be able to manage the money as he sees fit. If the mother is concerned about how the father may manage the savings, investments and insurance policy benefits that her children will inherit, she should set up a trust in her will.

With the right provision in her will, a mother can direct that all bequests to the children, retirement funds on which the children are beneficiaries, and the proceeds of insurance policies paid to the children be placed in a testamentary trust (one for each child) and these funds be managed by trustees, selected by the mother, for the benefit of her children and ensuring their living costs, education and so on are paid for.

Who should manage a testamentary trust?

Who should the mother select as trustees? I would recommend three trustees. One experienced independent professional trustee alongside two friends or family members whose judgement the mother trusts implicitly.

The trust can then be dissolved when the children have reached a specified age (usually 21 to 25 years) and the residual assets are paid out or distributed to them.

This will ensure that the children are cared for and that there is no risk of the father misappropriating funds.

Mothers should also nominate another guardian for their children in their wills in case their former husbands pre-decease them.

Difficult times after divorce can be overcome

Divorce can be difficult to navigate but it is possible to achieve a solid financial life afterwards.

Many years ago, one of my clients went through a difficult divorce. She got custody of her children and did not receive a good divorce settlement. She was under financial pressure and essentially had to start saving from scratch with just 20 years until retirement. She put a plan in place.

Family and friends were thankfully able to assist with her kids in key moments when work and family clashed. She worked incredibly hard, for which she was rewarded with good earnings and bonuses. She used most of the increases in her earnings to contribute diligently to her retirement savings, maximising her contributions wherever she could.

Twenty years later because of her discipline, hard work and sacrifice she has two paid off properties and more than enough to retire. 

Divorce can be difficult, particularly if you, the mother, are now also the primary caregiver for the children. Engaging with a financial planner could be one of the best moves you make, particularly if you have never done so before. They can help you get organized, protect you and your children, and move you step by step towards financial freedom.