Investing as a single-income household: Growing wealth with family

As the sole earner in your family, you have to juggle the responsibility of providing for those you love.

Investing may sound intimidating or even impossible in such a situation, but don’t worry! 

In this blog post, I’ll explore the simplest way to invest when you’re a single-income household.

I’ll cover the pros and cons of investing in a single-income household and provide practical considerations to get you started that have helped me.

I’m not a financial advisor so anything written in this post shouldn’t be taken as financial advice

The benefits of investing as a single-income household

The cost of living crisis has made things tough for many of us, but when you’re the sole earner in your household this can made the idea of investing unachievable, but investing can bring numerous benefits to your family’s financial well-being that you know about but need reinforcing.

Here are some advantages to investing:

Building wealth

When you start investing you’re laying good foundations for your family’s future financial growth. 

You should worry that you aren’t able to contribute much at first as these contributions will still grow over time, as a result of compound interest.

Creating a safety net

Life has a way of throwing you curveballs and it’s how you deal with these that ultimately affect your family’s health and wellbing.

Investing can serve as a safety net to protect your family from financial curveballs. 

A diversified investment portfolio can help to cushion the blow during tough times and give you and your family peace of mind when it’s needed most.

Saving for the children’s future

As a parent, you should want the best for your kids, and this might include providing a good education.  That doesn’t necessarily mean sending them to a school that costs £30k a term but could mean hiring a tutor for those subjects that they excel at and will help them in future or help them out if they should choose to go to university or learn a trade. 

Investing can help you save for their future educational needs. 

What you should always consider is that investing should be seen as a long term strategy and you should find investments that offer long-term growth potential

Planning for retirement 

Although it may seem a long way away, time has a habit of creeping up on you making retirement planning essential. 

Investing provides that opportunity for you and your loved one to retire a little more comfortably. 

Like many things, the earlier you start, the more time your investments have to grow.

The challenges of investing as a single income household

While there can be no argument that investing has its benefits, it also comes with its own challenges that you need to be aware of when you’re the only one bringing in an income. Here’s what you need to consider:

Limited resources

As a family living on a single income, you always have to be mindful of your budget.

Not one to usually state the obvious, but Investing requires money.

If your budget is limited, then start small, and make regular contributions. 

It’s important to assess your finances and determine how much you can comfortably afford to put towards investments without it affecting your immediate expenses.

Market volatility 

When you invest your capital is always at risk, there are no guarantees.

The value of your investments will go up but they will come down too so having some consideration for your risk tolerance is important and base your investment decisions accordingly. 

Downturns in the market will happen, but when you invest you should be taking a long-term view, and not worry too much about downturns as hopefully, you’ll benefit from the long game when the market bounces back.

Time constraints

As the person that brings in the sole income into your household, you will know that your time is precious.

Finding the time to research, manage, and monitor your investments can be challenging if for some reason you have decided to pick stocks yourself. 

Investing doesn’t have to be complicated and with a proper investment strategy can be automated by setting up a direct debit or allocating some money for investments when you get paid.

Look for investment options that require less hands-on management, so you can spend more time with your loved ones.

Things to consider before investing

Before you dive headfirst into the world of investing, here are some practical considerations for you to consider as a single-income household:

Build an emergency fund

Before you start investing, focus on building an emergency fund. 

You should aim to have saved at least three to six months’ worth of living expenses in an easily accessible account. 

Your emergency fund should act as a financial safety net and protect you and your family from the unexpected.

Tackle high-interest debt

Debt can have a negative impact on both your wallet and your mental health, while at the same making it harder to invest. 

If you have high-interest debt, you should prioritise paying this off as soon as you can, high-interest debt will usually come in the form of credit cards or personal loans. 

By tacking your high-interest debt, you free up more funds to put towards investing.

Explore investment options

If you’ve decided to try investing, it’s important to do your research on the different investment options available.

You will want to align these with your financial goals, risk tolerance, and time constraints. 

Consider low-cost index funds or exchange-traded funds (ETFs) as they provide diversification and potential long-term growth without requiring extensive knowledge or active management.

Start small and be consistent

I’ll reiterate this again, as I think it’s important, 

Investing isn’t just for the rich. Start with what you can comfortably afford and be consistent with your contributions. 

Investing smaller amounts is better than not investing at all or waiting until you have built a larger pot to invest in one go. 

Make investing become a habit and let compounding do its thing.

Seek professional advice

I’m not a financial advisor so this post shouldn’t be taken as financial advice.

If after you’ve done your own research you are still unsure about where to begin on your investment journey so that you are able to achieve your investment goals, seek the guidance of a professional who will be able to offer you advice based on your specific situation

A good financial advisor should be able to help you create a personalised investment plan and provide valuable insights.

Conclusion

Investing as a single income household may seem daunting, but it can be done. 

Simplicity is the key to investing as a single income household so stay informed

Remember, building wealth takes time and should be seen as a long road, be patient and consistent. 

Your mindset is also important when it comes to investing as it can be tempting to make rash decisions if there is a downturn in the market.

ARe you a single income household that invests, what tips do you have for our readers that are thinking of getting started, but are unsure when they can do it when they have a family to support?