From board meetings and conference calls, to play dates and bedtime stories, raising children requires a division of labor, so to speak. For many couples, the divide-and-conquer approach means that one parent stays home to focus on the family. Paycheck or not, there are some key financial considerations for stay-at-home parents that we want to highlight.
Work as a Team. Parenting is a team sport and your finances should be too. Get together a few times a year to prioritize your household after-tax income between needs (ideally 50%), wants (30%) and savings (20%). We recommend dividing some portion of the 30% to be applied toward wants between both of you to do whatever you see fit. Separate ‘fun money’ allows for surprise gifts and can eliminate the allowance-like feeling of asking for money. From personal experience, we can tell you that regular financial meetings to communicate and refocus on what matters to you both can reduce arguments about money.
Want help? Let us know if you want to join a webinar showing you how to create your own family meeting agenda.
Contribute to Retirement. You don’t have to be the one earning a paycheck to contribute to retirement. If you are under age 50 in 2017, you may be able contribute as much as $5,500 to a Spousal IRA ($6,500 if older). There are certain eligibility requirements for marking contributions and receiving an income tax deduction, so speak with your financial advisor before contributing. If you have a home-based business, talk to your advisor about setting up a SEP IRA or Individual 401(k) to potentially save much more.
Be Insured. Salary.com has estimated that a stay-at-home parent would earn over $100,000 if paid for providing childcare, housekeeping, cooking and other daily tasks. So, even though you may not be earning a paycheck, your family’s financial security would be compromised if you were to pass away. If you have only insured the life of your working spouse, we encourage you to secure coverage for you as well. Speak to your financial advisor to discuss affordable options such as term insurance.
Crack a Window. Keep your employment options open. Enjoy some social time while keeping in touch with co-workers or mentors. These same people may be your best advocates to help you re-enter the workforce if and when you decide to get back in. Consider refreshing your skills on occasion, too, by attending a conference or volunteering part-time. Again, from personal experience, all of these moves will make it easier to re-launch your career should that be the right choice for your family down the line.
Whether you report to the board room or the play room for work, we wish you all a very happy – and deserving – Mother’s Day!