The Rise of Stay-at-Home Parents: How Does It Impact Your Finances?
The number of parents who are staying at home with their children is on the rise, and it isn’t just an increase in stay-at-home moms, either. Two recent Pew Research studies found there are more moms and dads who are staying home to care for the family. A Pew Research study, titled Growing Number of Dads Home with the Kids, states that the number of fathers who do not work outside the home has risen in recent years, up to 2 million in 2012. That’s nearly double the 1.1 million fathers who were staying at home in 1989. In fact, dads represent a growing share of parents who are staying at home, which has increased from 10 percent in 1989 to 16 percent in 2012.
As for moms, another report, titled After Decades of Decline, A Rise in Stay-at-Mothers, writes that the share of mothers who do not work outside the home rose to 29 percent in 2012, up from a low of 23 percent in 1999.
As more parents make the decision to stay at home, it begs the questions: Why are they staying home? And how does it impact a household’s finances?
Why parents are staying at home
The Pew study on fathers found 21 percent of stay-at-home dads say they’re staying at home to care for their family, which is a big increase from the 5 percent in 1989. However, some stay-at-home dads aren’t there by choice. Of the stay-at-home fathers, 23 percent say they can’t find a job, and 35 percent, which is the largest share, are home due to illness or disability.
Furthermore, the study found that demographically stay-at-home fathers are worse off financially and are less educated than working dads. Forty-seven percent of stay-at-home dads are living in poverty, compared to 8 percent of working fathers.
“The largest share of stay-at-home dads are actually home because they’re ill or disabled,” Gretchen Livingston, a senior researcher at Pew, told NPR. “So that could be contributing to their low income, obviously.”
When looking at stay-at-home moms, Pew Research found the largest share consists of “traditional” married stay-at-home mothers, who have working husbands. They make up about two-thirds of the 10.4 million moms who were staying at home in 2012. The economic climate likely influences mothers’ decisions on whether to stay home or work; the share of mothers staying home with their kids rose from 2000 to 2004, but that stopped in 2005 when economic uncertainty began to foreshadow the start of our country’s recession. The increase in stay-at-home moms then started to pick back up as the country worked its way out of the recession. From 2010 to 2012, the share of stay-at-home moms was three percentage points higher than in 2008 (26 percent).
However, the study also found that a growing number of moms who are staying at home are there because they can’t find a job. In 2012, 6 percent said they were at home because they couldn’t find a job, up from 1 percent in 2000. Furthermore, the study found that one of the most striking differences between stay-at-home mothers and working mothers relates to their economic well-being. A startling 34 percent of stay-at-home mothers are living in poverty, compared to 12 percent of working mothers.
Financial impacts of a stay-at-home parent
Research shows the majority of stay-at-home fathers aren’t choosing to stay home, but rather, are forced to due to unemployment, disability or illness, and nearly half are living in poverty. Stay-at-home moms also show a higher-than-normal poverty rate, with over one-fourth living at a poverty level. Interestingly enough, when a stay-at-home parent’s duties are broken down by daily tasks, which could include being a nanny, driver, cook, janitor, psychologist and laundry-machine operator, it becomes clear there are some savings involved with having someone stay at home. A 2012 Salary.Com calculation found that when you add up all of the stay-at-home duties, it would cost $112,926 to replace a stay-at-home parent.
Business Insider writes that many households with two working parents are finding that the cost of paying someone else to take care of their children is skyrocketing. In some of the pricier states, such as Connecticut, Minnesota and New York, the annual cost of daycare for young children is more expensive than the cost of college tuition and board. In Massachusetts, daycare can set parents back $19,000 a year, on average, meaning some parents are putting half their annual salary toward childcare. “For a quality day care or a nanny, it would have cost us about my take-home salary,” Lance Somerfeld, a stay-at-home parent, told MSN. “Why would I pay someone else to take care of my child when I can do it for the same cost?”
Converting to a single-income family can actually put a home in a lower tax bracket, too, according to MSN. In addition, staying-at-home can help save money in smaller ways, by cutting back on work clothes, dry cleaning and expenses that come along with commuting to work.
If you’re considering becoming a stay-at-home parent, take a look at a few of these tips to help keep your finances on track, per Time.
- Set a realistic budget. Even if you are saving on expenses such as daycare, you still need to be careful with money; you’re losing an entire salary, after all. Take inventory of your fixed expenses, such as mortgage and utilities, along with discretionary expenses, including entertainment and clothing. Be prepared to make tradeoffs to make the stay-at-home arrangement work.
- Consider insurance. Stay-at-home parents should still be insured. Younger couples sometimes don’t think about disability insurance, but many disabilities stem from everyday activities, such as car accidents and sports injuries. If a stay-at-home parent is injured to the point where they can’t care for their children, the couple would most likely need to hire help, making disability insurance prudent.
- Think long-term. Make sure you don’t forget about retirement. If you’re only living on one income, it’s important to plan and continue saving. A stay-at-home parent may want to consider rolling his or her employer-sponsored retirement plan into an IRA or a Roth IRA; the working parent can continue to fund a spousal IRA or Roth IRA to save for the retirement of both parents.