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How To Decide If One Parent Should Stay At Home

For nearly everyone, parenting is a life-changing and exhilarating experience. But it always requires making some fundamental decisions about how life is to be lived.  One of the primary examples is the two-income couple.  They will have to consider the pros and cons of one parent staying home to raise their child or children.

The decision to become parents almost pales in comparison to the decisions looming large about how to care for them. You’ll consider whether your house is big enough, whether the local schools are good enough, and whether your parents or others you trust are near enough to help.

If you’re in a two-income household, child care decisions can be fraught with emotion. Among the factors driving consideration of a stay-at-home-parent includes each parent’s career ambitions, their incomes, and the cost of local child care.

While finances are a significant component, it’s an entirely personal choice—one that brings meaningful short- and long-term consequences for the entire family. Here are some considerations to support you in making the right decision for your family.

Start by aligning your values and goals

We suggest starting with focused discussions about your individual and joint careers and financial goals. Big lifestyle changes can significantly impact your finances, and a strong financial plan is crucial to getting where you want to go.

Set aside ample time to work through your feelings and desires, and be mindful of addressing them carefully, lovingly, and honestly:

  • How many years should you commit to one parent being at home with the kids?  Until kindergarten, or until you see them off to college?

  • If one parent takes 5-18 years out of the workforce, how does the time at home impact the difficulty of re-entry?

  • Will either of you regret not pursuing your career dreams? 

  • How will you address the inevitable pressure that this lifestyle puts on the income-generating parent?  Maybe you could tag-team, with 5+ years each at home?

  • How will this change impact your short-term and long-term financial goals? Do you have a solid retirement plan in place and how might that change?

  • Are you both on the same page?

  • Whatever you decide, are you being clear about what both sides are willing to compromise without feeling they are shouldering the bigger sacrifice?  (Sacrificing can lead to resentment, never a healthy thing for a long-term relationship.)

Crunch your numbers

The bottom line here is whether you can arrange your lives so that your annual expenses are less than total household income. 

Many couples move to a less expensive state or town to prioritize a stay-at-home parent lifestyle. We recommend aligning your top priorities and building your lifestyle around them.

Some financial questions to consider:

  • Can your income plan really support a one-income household? 

    • Crunch your numbers to determine whether or not your family can reasonably afford to have one parent stay at home and what lifestyle shifts, if any, would be needed to accommodate this change. 

  • What would it look like to move from a two-income household to one? What would your new monthly income be? 

  • Could you refinance your house to get a lower interest rate to offset some of the income loss?

  • How will your child increase your monthly budget? 

    • Your expenses will likely rise to pay for diapers, formula, toys, and medical care, but could be offset by what you’ll save in childcare costs, commuting and professional costs, etc. 

  • Does your new budget scenario feel uncomfortably tight? 

    • Take ample time to estimate actual costs and savings.

  • What might you lose from one of your employee benefits packages?

    • Even if one parent’s salary is lower than the other’s, a benefits package for a two-income household can add up significantly. Consider whose health insurance and 401(k) match are better, for example.

Where there’s a will, there’s often a way. Some couples plan for their baby for years, squirreling away money to enable more options. If raising a child is a big part of your plan, increase your financial savvy, and cut extraneous spending where you can. 

Ideally, before you start a family, take your new budget for a test drive. If you are worried about the transition from two incomes to one, test it out. This way you will be able to see what works, what doesn’t, and shifts that may be required to make the transition easier.

Run scenarios with your financial team

If you’ve already decided that one parent will stay home, validate your assumptions with the ‘test it out’ mindset above, and sit down with your financial team to run some scenarios. 

Your CFP® professional can determine the long-term impact of 5-18 years with only one parent contributing to an IRA or 401k, for example. Seeing the numbers in front of your eyes can help determine how many years of a one-income household are realistic.

If you’ve already decided which parent will stay home, if s/he has an existing 401(k) plan, it may make sense to move those funds elsewhere in your portfolio.

Other savings accounts or goals impacted by a one-income budget include:

  • Emergency fund

  • Vacation/travel fund

  • Upgrading to a larger home

  • Home renovations and maintenance

Make a decision together

As with most big life decisions, there are pros and cons with whatever path you take. Be sure to have open, honest, and ongoing discussions about this with your spouse

One thing to ease any anxiety or worry you may feel is that nothing is set in stone. You can change your plan if needed. Many parents who dreamed of staying home are desperate to go back to work after three months of maternity or paternity leave!

Consider all these important factors from a financial as well as a personal perspective. The ability to intentionally balance financial facts with your preferences and emotions will help you make the decision that is right for your family. 

We are always here to help and support you. Contact us today to learn how we’ve supported other families in our community.