By Amy Shepard, CFP, RMA
Like most decisions in life, deciding to be a stay-at-home parent is one that should be made based on your values. We all have different values and staying home to raise a family is not for everyone, which is perfectly ok! However, if you’re in the camp that values the idea of a stay-at-home parent for your children, read on for some important considerations from the perspective of someone who is lucky enough to have a stay-at-home husband and also have a career as a financial planner which helps a ton with the financial considerations.
How do you decide if staying home with the kids is right for your family?
The first step is to have lots of conversations. What do you envision for your future (or current) family? Do you both have careers you love? Do either of you want to be a stay-at-home parent? In my relationship, we had always talked about my husband staying home with the kids if we ever had them. He’s a natural with kids and always thought it would be a rewarding experience (now that we are expecting our third at any moment, he may question this choice from time to time!). We both talked about how special it would be to have that extra family time and how nice it would be to not have to rush to get out of the house each morning and deal with daycare drop-offs and picks up. For us, discussing our values and the lifestyle we envisioned helped us to make the decision for my husband to stay home.
What are some of the financial considerations?
One of my favorite financial sayings is “anything can fit in the budget, but not everything will fit”. For those who really value the idea of a stay-at-home parent, there may be some financial sacrifices needed but it will be worth it if it’s what you really want.
Take some time to review your monthly budget and determine if it’s doable on one income. For many people, it might not seem too far-fetched once you include the cost of childcare, especially for multiple children. If the numbers are tight, review your expenses and see what can be trimmed down. Remember that once one of you stops working, you’ll have less commuting costs, less opportunity to go out to lunch, possibly less expense for maintaining a professional wardrobe, etc.
Going from a dual income to single income household makes having an emergency fund even more important. When a family is relying on a single income, I recommend having at least 6 months of expenses covered, but having 9-12 months covered is something to strive for.
Another important financial piece is disability income insurance to help provide financial help should the sole income earner experience an unexpected injury or illness. Long-term disability coverage is key here – your emergency fund is there to get you through any short-term or temporary disability but long-term disability coverage is there to protect a portion of your income in more serious situations.
This is important for both the working parent and the stay-at-home parent. For the parent who’s working, having enough life insurance to replace their salary for a significant number of years is critical so that the stay-at-home parent can have the financial means to care for the family should something happen to the breadwinner.
For the stay-at-home parent, the same concept applies – if they were to pass away unexpectedly, the working parent would suddenly need to figure out how to balance work, childcare, and home duties on their own. Life insurance on the stay-at-home parent would provide the financial resources to take time away from work to adjust to the loss of your spouse, to cover childcare costs, and to ease the burden of becoming a single parent.
What other factors are important when considering having one parent stay home with the kids?
Like most decisions in life, this type of choice is about so much more than money. Being a stay-at-home parent, and being a working parent, can both be tough. Ongoing communication about your goals, family life, and finances is important so that you can both stay connected and make adjustments as your situation evolves.
About the Author: Amy Shepard, CFP®, RMA®, BFA™, MBA
Amy Shepard, CFP®, RMA®, BFA™, MBA is a Financial Planner at Sensible Money. She has been working with clients since 2013 and loves helping them create and implement a financial plan so they can achieve their life goals. She is involved in the CFP Boards Mentor Program and previously served on the board of the FPA of Greater Phoenix. Outside of work she enjoys spending time with her husband and kids – they have a goal to take a family picture in all 50 states!
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