Protecting the Stay-at-Home Parent Financially
Growing up, my dad taught me about earning money and saving money. We would earn an allowance and each time we came up on “pay day,” we set aside a certain amount that would go into savings. This was back in the day when we would actually go into the bank to make a deposit and the teller would write in our little savings book the amount we deposited and the current balance of our account. I was learning how to handle money at an early age and didn’t even know it!
I went to college and married at a young age. After earning my Bachelor’s Degree, I found my very first full-time job. In fact, it started as a temporary job where I was answering phones and then expressed an interest in the company’s financial duties (i.e. paying bills and collecting money) and eventually took the place of the CFO. I was working more than full-time and money was being taken out for taxes and health insurance. Then, after a year and a half with the company, I found out we were pregnant with our first boy. I worked all the way up until the day I went into labor with him, with the intention of working for the company from home. We moved out-of-state and the company decided it wouldn’t work to have me work from home. I decided at that point that since I had the opportunity to be a stay-at-home mom, I would take it.
As a stay-at-home mom (or parent), your top concern is the well-being and the physical and monetary survival of your family. But what do you do if something happens to the parent who has a paid position outside the home? These are things that I didn’t really think about when I was a stay-at-home mom but that hopefully other stay-at-home moms (parents) could benefit from.
I recently came upon a really great article, entitled, “Financial Planning’s Gaping Hole That Spells Disaster For Stay-At-Home Parents.” Although the article was focused on Stay-at-Home Parents, I felt that it also applied to those of us who are Work-at-Home Parents. Although I am making an income, I am not building my Retirement benefits, nor am I building my Social Security benefits.
Here are five special financial considerations for stay-at-home parents and work-at-home parents:
– Obtain life insurance on the stay-at-home parent. Yes, there would be a financial loss if something happened to the working parent, but there would also be a financial loss if something happened to the stay-at-home parent. For instance, how much would it cost for child care or housekeeping services?
– Supplement term with permanent insurance. Purchasing term insurance when you are younger and need it most can also be less expensive than purchasing it when you’re older and closer to the age of retirement. If something happens to the working parent, the benefits from term insurance may help the stay-at-home parent meet financial needs that Social Security benefits may not provide.
– Check the “occupation” definition on the working spouse’s disability insurance policy. Did you know that there is a one in four chance that a 20 year old will be disabled before they retire and that currently 12% of the total population in the U.S., about 36 million people, are classified as disabled? While many professionals may have group disability policies through their employer, those benefits may not be adequate for a long-term disability. The best definition is “own occupation” – the policy will pay the benefits if you are unable to perform the duties of your current occupation.
– Put college funding on the back burner. In one-income families, retirement should come first and college funding second, according to financial planners. Check out the retirement calculator below to determine if you are on track to retire, and only then start funding college savings accounts for children.
– Make joint decisions on investments. Both parents should take an active role in their family’s investments, understanding what they are investing in, reviewing their statements, and making joint investment decisions.
This post was inspired by Genworth Financial. All opinions expressed in this post are 100% mine. For more information about life insurance, visit the Genworth Financial website.