Can I Afford to be a Stay-at-Home Parent?

Many new parents wonder if one of them can become a stay at home parent without straining their finances and current lifestyle. There are several pros and cons of stay-at-home parenting and factors that play into the decision including salary, retirement, and education. Financial advisors can offer families crucial feedback about potential consequences of stay-at-home parenting and whether or not it makes sense for them.

Sheraz Iftikhar, a managing partner at Arch Global Advisors in New York City, uses several different metrics to figure out how much time at home families can afford. If one parent stays home, he says, the family should ideally be able to afford the same lifestyle as before. Sometimes staying home with your child is more important than the potential revenue from going back to work, but before making that decision, you must consider all of the variables.

Planning for Retirement 

If one parent leaves work, the couple should still be able to contribute the same amount to their retirement fund. Iftikhar says 5-10 percent of disposable income made by a couple between the ages of 30-40 should go into retirement savings; that number should increase by 5 percent for a couple between 40-50.

“Now why is that important?” Iftikhar asks. “If you are in your thirties and you’re not able to put away five to ten percent, because now one spouse decides to stay at home, that becomes a difficult decision. Our advice then would be, yeah, you may be able to survive today, but what happens five years down the road and ten years down the road?”

Saving for Your Kids' College Education

Saving for college is another big issue to consider. Inflation in education is just north of 6 percent for private institution tuition—which means a private college’s current tuition will double in 12-13 years. Parents must be aware that if one stops working, they might not be able to save comfortably for their kids’ college. 

However, parents can take some of the anxiety out of the college situation by talking about what kind of college they are targeting, Iftikhar says. Private tuition can be incredibly expensive and public schools can be much more affordable. In fact, the price disparity is so large, Iftikhar suggests parents make the discussion a priority. 

Brian Cohen, a principal and investment advisor at Landmark Wealth Management in Melville, agrees it’s vital that parents are on the same page about education. Beyond public versus private schools, both should agree on whether they want to pay for their children’s entire education or make the kids contribute.

“What I wanted [my kids] to do is at least have skin in the game. I said, ‘I’ll pay for a SUNY—anything above a SUNY cost is on you if you really want that,’” Cohen says. On the other hand, if parents want to pay the entire tuition cost at whatever their child’s dream school may be, they may not be able to afford to have one parent stay at home. “There are tradeoffs on both sides,” Cohen says.


Challenges of Re-Entering the Workforce 

Chris Congema, a Certified Financial Planner at Landmark, raises another potential consequence of one parent leaving the workforce—it’s difficult to get back into it.

“If someone’s going to be leaving the workplace for ten years or five years as they’re raising their children…as technology and time pass them by, do they lose some of the skills that made them employable?” Congema asks. “Do they have to change careers? Will their education still make sense now? Getting back into the workforce can be a challenge after you’ve been out for so long.”


Making Difficult Financial Decisions

Despite these challenges, Cohen and Congema have noticed a shift in how parents are able to continue working and be with the kids by keeping flexible schedules or working from home. They have also seen an increase in stay-at-home dads with moms remaining in the workforce. And they’ve noticed that as couples marry and have kids later in life, they are more aware of the preciousness of watching their kids grow up—and of being around for early milestones. 

When making the difficult stay-at-home decision, having a financial planner can be vital. At Landmark, Cohen and Congema help couples figure out how much disposable income they have each month, whether they can go without one person’s income, and whether there is any “fat” in their spending that can be cut to mitigate losing one person’s salary. 

But even when all the numbers are in, some parents will still decide to buck the financial repercussions in order to spend more time with the kids. This is a decision that ultimately only parents can make.

As Congema says, “[Spending time with the kids] during this important time when they’re forming a personality and who they will be in the future…that’s something that can’t be overlooked or understated.”