5 Financial Pitfalls Stay-at-Home Parents Should Avoid

By Ashley Marcin on 26 May 2015 0 comments

Staying at home with my daughter has been one of the best choices I've made in my life. At the same time, there are a number of money concerns I didn't necessarily expect when I handed in my resignation. For those of you who stay home (or who might be considering this big life change), take heed. You can do it the right way — protecting your financial future — with a little research and planning.

1. Retirement Planning

Suze Orman's advice is to contribute what you can in preparation for retirement. Spouses can claim Social Security benefits based on their partners, even in the event of divorce. Use the AARP's Social Security Calculator to estimate your individual take-home benefit. Beyond that, there are Spousal IRA accounts where you can stash away as much as you like, provided the working partner makes enough each year to cover your contribution.

2. Life Insurance

It's an area nobody likes to think about, but securing life insurance is wise for both working and stay-at-home parents, alike. And just because you're not making money doesn't mean you're not contributing to your family. Securing life insurance will help your family with funeral bills, child care, education costs, and more if something ever happens to you.

3. Divorce Dollars

The rate of divorce has more or less stayed the same over the past several decades at around a whopping 50% of marriages. Stay-at-home parents are in vulnerable financial positions if they find themselves in the courtroom to make the split. Whereas alimony used to be the standard means of support in years past, judges are now granting these maintenance dollars much less freely. Of course, health insurance, retirement, court fees, and other money woes are wrapped up in this issue as well.

4. Resume Builder

Thinking ahead, I know I'll someday need to go back to full-time employment. Getting a job with a huge gap in my work history sounded daunting. So, I've been keeping my skills current. As a writer, I've had the amazing opportunity to work from home through freelance writing. Even if your area of expertise isn't so easily honed from home, you can check out different volunteer gigs, side-jobs, education opportunities, professional connections, and other ways of staying fresh in your field. That way, when you do submit a resume years down the line, you'll show you've stayed connected to the job market.

5. Emergency Fund

Even the most financially sound families should save up an emergency fund. We found this area particularly important when I decided to stay home. For example, my daughter ended up having some unforeseen medical issues. Our monthly budget only makes ends meet, so having some extra money set aside helped soften the blow from all the doctor bills. A broken furnace, totaled car, or even your spouse's job loss could spell disaster without some planning. (See also: Is Building an Emergency Fund Always a Good Idea?)

How has staying at home impacted your financial planning?

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Kelli B

Great tips - especially the "resume builder". You never know when you're going to have to go back to work (another recession, divorce, etc.) so its always good to be prepared.