It’s not always an obvious decision to have a stay at home parent go back to work once the kids are in school. Although most families could put a second income to good use, it’s not always offset by the convenience and peace of mind that comes with having one parent always available to chauffeur to their after-school activities, for sick days, snow days, school vacations, to help with homework, cook meals and clean (whew!). Many stay at home parents are also finding that it’s not easy to get hired after so many years out of the workforce with so much competition for jobs.
If you are or are planning to be a long-term stay at home parent (or being the breadwinner in such a family), here are five action steps to take to make sure that you and your family are as financially protected as possible.
1. Make sure both spouses have adequate life insurance and that the working spouse carries short and long term disability. Most disability insurance policies only pay between 50-70% of the disabled person’s income – not enough for most families to be completely “okay” but it will cover a significant portion of the absolute necessities at a time when you need it most. The other parent can also bridge the gap by returning to the job market as you transition into the new situation.
2. Look for opportunities to keep your skills current, your network strong and your resume updated. If the need arises, you’ll want to be ready and able to start looking for a job right away. This could mean anything from keeping professional licenses current to making sure to keep in contact with all of your former co-workers and others in your former field.
3. You might need more flexibility than a traditional job can offer, but you should have the time to be able to pull together a side job or two to add to the family’s savings. Even an extra couple of hundred dollars can be a huge help. As an added bonus, the side job can keep job skills current and provide a much-needed outlet for the stay at home parent. (Here are 15 suggestions you should try.) Not that stay at home parenting isn’t more than enough to keep a person busy! It’s just that most people need something outside their family to feel like they still have their own identity.
4. Save for your own retirement! Talk to your investment adviser about opening a spousal IRA or a similar retirement vehicle. Not only does it allow you to put away more tax-advantaged money away above the single-earner limit, it’s also a sound step to take for the stay at home spouse’s financial protection. Even if divorce is not an option, both spouses having their “own” retirement accounts can reinforce the idea that both are equal partners, which in turn can lead to greater marital harmony and satisfaction.
5. Do stay in the loop when it comes to money. It usually works best for one spouse to be the one in charge of the finances, but both need to be involved in making major decisions and both need to know where all the money is. In addition, there needs to be a quick and easily accessible way for the other spouse to step in should the need arise.
This doesn’t mean that each spouse can’t have their own stash of personal money, just that both spouses need to have full access to the household’s money and financial records. (Note: in some specific cases full access to household money would not be advisable, such as in the case of addiction or mental illness. In these cases, there still needs to be open communication and a plan in place for how to deal with finances if the spouse with access is incapacitated)