A recent report from MagnifyMoney released in the spring of 2021 found that the percentage of stay-at-home parents has risen 60 percent across all fifty states and the District of Columbia since 2019. COVID-19 has undoubtedly affected the numbers, as has changing gender roles and paid and unpaid leave. But, regardless of the cause, the landscapes of the workplace and parenting are rapidly evolving.
Ask a stay-at-home parent this question, and you’ll likely get a raised eyebrow. They know their value to their family, and the checking account, can’t be measured.
For example, a study cited in the Harvard Business Review showed that 10th-grade students who had a parent stay at home with them during their younger, more formative years had measurable scholastic benefits (a 1.2 point increase in Grade Point Average (GPA)). The research hypothesized that parents staying at home may have been more available to help their children with their schoolwork.
The economic impact of a stay-at-home parent is also remarkable. According to Salary.com, the parent staying at home and foregoing traditional employment would have a median annual salary of $178,202. This can be attributed to the many roles they play: child care worker, house cleaner, private chef, driver, laundry service, and many more.
In addition to these roles, a growing percentage of stay-at-home parents have taken on gig work, whether it's driving for Uber or freelancing as a developer, designer, or writer.
Depending on the size of the family, home, pets, and numerous other conditions, a stay-at-home parent may work nearly 100 hours per week.
While the value of a stay-at-home parent can’t be measured, the financial impact of one less paycheck can. Couples with one parent at home not receiving a regularly scheduled paycheck need to make financial adjustments to adapt to having a single salary. And they have to adopt new strategies concerning their finances.
Here are five tips to help couples with one parent working and one at home keep their financial house in order and secure their future.
Tip #1: Work as a financial team
Many couples with one parent at home only have the working parent handle the finances since they generate the household’s income. This is a big mistake.
Many stories tell of the death of a working spouse who handled the family’s finances with no involvement from the stay-at-home parent. The survivor had no familiarity with everything set up online: paycheck deposit, bill paying, investment management, and much more. As a result, they were lost and highly stressed when they immediately assumed responsibility for money management.
In addition to a parent’s physical death turning a couple's finances upside down, divorce also must be considered. The end of a marriage or partnership is devastating on many fronts, including finances. The stay-at-home parent who had not been involved in the couple’s financial management may ultimately be granted access to financial records, but the period they’re kept in the dark can leave them with unpaid bills and a significant drop in their credit score.
Both parents should also know where all their important documents are kept: wills, trusts, life insurance policies, deeds, mortgages, and auto titles.
Tip #2: Build a budget together
It’s surprising how many stay-at-home moms and dads don’t know where their family’s money goes every month. Their jaws drop when they take a good look at their expenditures, especially having children at home. The only way to remedy this is to put together a monthly budget.
A monthly budget helps you from having “too much month left at the end of the money.” With a budget, you can see expenses that can be reduced or eliminated, and other areas that can be targeted for more money, like savings or investments.
Each parent should have a set monthly dollar amount that they can use any way they’d like without consulting their partner. Stay-at-home spouses should not have to ask for money for discretionary items like clothing and hobbies.
[ Related read: 26 of the best personal budgeting tips ]
Tip #3: Make sure you are adequately insured
Many couples fail to properly insure the stay-at-home parent when it comes to life insurance. They heavily insure the parent generating the income to replace their income if they die, but they either don’t insure or underinsure the stay-at-home parent.
Both couples should have substantial amounts of life insurance (a financial advisor can help you determine the right amount) to replace the earner’s income and to have all of the other duties and responsibilities of the stay-at-home parent attended to should they die.
Disability insurance must also be in place for the working parent. The loss of the sole paycheck due to an illness or injury would devastate the entire family. Statistically, you stand a greater chance of becoming disabled during your working years than you do dying.
Tip #4: Set up an emergency fund
It may seem unrealistic at first glance, but you need to have money in an account solely to pay for unexpected expenses. Why do you need an emergency fund? Well, because life happens: kids need braces, cars break down, appliances wear out, and they all seem to occur at the most inopportune time.
Sit together and review your budget. It’s not enjoyable, but you’ll find some things that you can eliminate in the expense column. Save up 3-6 months of income and you can resume those expenses, though you may see that you didn’t need them in the first place.
Tip #5: Keep growing professionally
The parent staying home may be returning to the workplace at some future date. They’re going to have a gap in employment that some potential employers may be concerned with. Letting them know that you’ve kept up with industry developments and developed new skills can alleviate any concerns they might have.
The stay-at-home parent should also stay in touch with their professional network. You can stay connected to peers by attending conferences and events they’ll be at, and you can always meet up with them after-hours while the other parent takes care of things at home.
[ Related read: The importance of return-to-work programs in 2021, explained ]
Being a stay-at-home parent can be incredibly rewarding, but it takes some planning to keep the financial side of the house from becoming a stressor that detracts from your time with your family. There are many books and online resources for stay-at-home parents to stay healthy financially. They’re worth the investment of your time and will pay dividends for the entire family today and in the future.
Having grown up in upstate New York, Bob Phillips spent over 15 years in the financial services world and has been making freelance writing contributions to blogs and websites since 2007. He resides in North Texas with his wife and Doberman puppy.
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