Families with only one income earner have a different set of challenges than those in families with two incomes. That isn’t to say that one is necessarily better or easier than the other — instead, it’s more instructive to see them as two different scenarios. What works for a family with two people working outside the home might not work for families with a stay-at-home parent. In this article, we’ll look at some of the best money advice for stay at home parents.
Make a plan as soon as possible
The most important thing that you can do is make a plan as soon as possible. Even if you’re not sure you want to have one parent stay at home, make a plan for what that would look like as soon as you think it might be a possibility. This might be when you’re expecting your first child, expecting another child or when your life or job situation drastically changes.
One of the keys to a successful marriage or relationship is open communication. You might find that both spouses have very different expectations for what this lifestyle change might look like. You’ll want to make sure you’re on the same page for questions like:
- Who will do the childcare?
- Whose responsibility are the household chores like cooking or cleaning?
- What does the overall schedule look like?
There’s not one right answer to these questions — instead the answers will vary drastically on your own specific and unique situations. But it’s very important to make sure that everyone has the same expectations.
Setting up a budget
One of the most important parts of making a plan is setting up a budget for what it might look like if you have a stay-at-home parent. This is especially true if you’re migrating from a situation where you have two people working outside the home to one where only one person is bringing in money from a job.
The simplistic way to look at an updated budget is to just subtract the salary of the lower-paying job and see if you can live on just the salary of the higher-paying job. The reality is a bit more complicated however. Not only will you not pay taxes on the income from the 2nd job you no longer have, but you’re likely to be in a lower tax bracket overall and owe less tax even on the one income that remains.
If you’re currently paying for childcare, you’ll likely also be able to save that cost with a stay-at-home parent. And beyond that, there are additional opportunities for savings when one person is not working outside the home. With more time at home, you might be able to cut back on your food budget by taking more time to save money on grocery shopping and preparing more meals at home. The best thing to do is create a budget and see how the numbers look in your situation.
Taking advantage of side hustles
While the stay-at-home parent might not be making money outside the home, they may be able to still bring in money through a side hustle. Side-hustling is much more common and accepted nowadays, and can be an attractive option for a stay-at-home parent. While most people won’t be able to turn their side hustle into a full-time job, it can be nice to bring in a little extra money if your situation allows.
Make sure you’re properly insured and protected
One important thing to keep in mind if you are in a situation where you are relying on one person’s income is to make sure you have the right insurance. Make sure the spouse that is working outside the home has sufficient life insurance that it would not be a financial catastrophe if they were to suddenly pass away.
If the stay-at-home spouse is caring for young kids, it’s also important to make sure they have an appropriate level of life insurance. After all, it would still be a big financial impact if they were to unexpectedly pass away. It can sometimes be challenging to get life insurance on a stay-at-home spouse, so it may be a good idea to set that up before they leave their full-time job.
How to plan for retirement
One of the best things that you can do for your retirement is to set up an Individual Retirement Account (IRA) as soon as you can. An IRA allows you to put aside money for retirement and have it grow tax-free or tax-deferred (depending on if it is a traditional or Roth IRA).
Contributing to an IRA requires that you have earned income, but if you file a joint tax return and your spouse has earned income, you are also eligible to contribute to a spousal IRA. This way you can both contribute towards your retirement even though only one of you has earned income. You may not be able to contribute to a 401(k) without an employer, but a stay-at-home parent might be able to set up a SEP IRA if they are self-employed, like from a part-time side hustle.
Dan Miller is a freelance writer and founder of PointsWithACrew.com, a site that helps families to travel for free / cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 kids.