When it comes to planning, it’s not uncommon for stay-at-home parents to be overlooked. When I’m meeting with families, I prefer to have everyone involved in the conversation. Yes, even a stay-at-home parent who “doesn’t work”. Because, at the end of the day, the value they provide is far more than the income stated come tax time.
Often, it is decided for one person to stay home after weighing the costs of childcare. Included are some of my favorite tips when it comes to addressing the financial planning of a stay-at-home parent.
- Plan with your spouse. If you are in the transition from the workforce to staying at home, it can be a little tough on the ego. However, an in-depth chat on budgeting is a good place to start. Consider setting up a reoccurring allowance to allow for some financial freedom for the person staying at home, a discretionary account for the working spouse, and a combined account for fixed expenses. Human resources should be able to portion your paycheck into multiple accounts.
Another aspect to think about, would be to weigh the benefits of having accounts or belongings in either one person’s name or having joint ownership, based on your financial history and health.
- Life insurance. It’s not uncommon for people to think they don’t need life insurance if they’re not the breadwinner. Yet, consider the cost of childcare. In addition to current fixed expenses, final expenses, and a possibly reduced income to account for time off to mourn, etc., would there still be enough money left over to comfortably cover the costs of childcare if the stay-at-home spouse passed away?
- Disability Insurance. Along the same lines of life insurance, I’d recommend looking into disability insurance for the spouse staying home. Any parent you talk with will tell you taking care of the children and the house is a full-time (and not an easy) job. If you were to become injured or fall ill for an extended period, it wouldn’t be unlikely that you’d at least need to get some assistance. Not every company offers disability insurance for stay-at-home parents. However, there are some that do.
- Pre or postnup. No one wants to talk about them. But, it’s a smart move for protection in the case of divorce. Just like we don’t expect a disability to happen, we don’t expect divorce to happen. However, there are perks to planning for it anyway.
- Save for retirement. Perhaps it’s not common knowledge, but there are retirement options for stay-at-home parents. For example, with a spousal IRA, there is no need to have proof of income. And, if you are like many multitasking moms today who have some type of side hustle and a little bit of income, you could look into a solo 401k.
- Plan for the healthcare options available to you. Health insurance can be a relatively large fixed expense. If one spouse is offered rather attractive healthcare benefits through their employer, this might also be something that tips the scales toward the other spouse being the one staying home.
I know some of these steps are easier said than done. Nevertheless, I’m always happy to chat, mediate a conversation, or simply provide insight from an outside source.