Financial Tips for Stay-at-Home Parents

Many parents juggle career and family life. In fact, 46 percent of households with two spouses said they were both working full time in 2017, up from 31 percent in 1970.

But … having a parent stay home to care for the kids is also a popular choice. After all, childcare is NOT cheap, and many find great joy in being able to stay home to enjoy moments big and small.

There are pros and cons to either scenario, but if you opt to have one parent stay home for caregiving, you need to create a financial game plan that will ultimately benefit the entire family.

Here are some financial tips to consider if you have a stay-at-home parent in the family, or wish to create this scenario in the future:

1. Become a master at the financial basics. This includes budgeting, saving, general financial planning and organization. Living on one income can be done, but there is obviously one less salary contributing to the family funds. Both parents should be familiar with the outflow of cash and expenses to know how much money is being saved for retirement, big purchases and emergency funds. The stay-at-home parent should look for ways to maximize the budget for groceries, clothes, necessities and entertainment. Ideally, you might want to practice living on one income before you take the plunge. Try living off one salary and sock the rest into savings. You’ll then be able to assess how tight your budget needs to be and create a savings cushion in the event of an unexpected repair, emergency or job loss.
2. Don’t forget about a retirement account for the stay-at-home parent. Lost wages and missed retirement contributions can have a huge financial cost to the stay-at-home parent in the long term. Often, the plan is simply to live on the working parent’s retirement funds if one parent plans on staying at home. But, you can still open a spousal IRA. This protects the stay-at-home parent in the event of divorce, while also allowing a couple to save retirement dollars for both individuals. It’s important to remember that the stay-at-home spouse is not contributing to social security or a traditional 401k during these years, so they are not benefiting from compound interest. The spousal IRA provides some cushion and acknowledges the work and sacrifice of that parent during the years of staying home.
3. Consider working part time. It can be difficult to re-enter the job force after a career break, so working part time not only helps bring in some extra money, and keeps a stay-at-home spouse’s skills and employment history active during the caregiving years. If you have a license for your profession, keep it active through working minimum hours and maintain your education credits so you can return to work quickly if needed. Also, research work-from-home options. From call center work to consulting, a stay-at-home parent can find a schedule that works for the household and brings in some extra money.

The parenting years are expensive, so establish a plan for the lifestyle you want to have while the kids are living in the home, as well as when they leave the nest. Surviving on one income is certainly doable, but just ensure you think about all expenses and the savings you will want longer term so both parents can enjoy the retirement years.