When you’re planning for a child, you know your life will be turned upside-down for a long time. Newborns, infants and toddlers can take up a lot of time in caring for them, as they lack many functions. Some parents have the privilege of taking maternity/paternity care, and some don’t. But regardless, there has to be a plan in place regarding whether parents will stay in the workforce, or one parent will resign from a job to stay home with the child.
There are certainly pros and cons to either situation, but with only one main source of income, making a firm but flexible financial plan that will benefit your entire family. Here are a few tips to get started:
- Master the basics of finances. When you consider the important basics of finances and what you need reach success, consider general financial planning, budgeting, saving, and keeping organized. It’s important for both parents to check on the outflow of funds and where they’re going, such as money set aside for retirement, groceries, larger purchases, emergency funds, and so on. The parent staying at home could look for different ways to maximize your budget to include groceries, doctor’s visits (there will be a lot in the first two years) and other necessities. Before you have children, assuming both parents are working, should consider living off of one income for some time and put the second paycheck into a savings account.
- Think about taking on a part-time jobs. Assuming you aren’t homeschooling, when you children get to elementary school, it frees up a lot of your schedule. Taking a part-time job has many benefits, such as contributing to the household income, keeping your resume up to date should you choose to go back into the professional workforce when your kids are older, and maintaining your license for your line of work. Also, there are many work-from-home part-time jobs you can find online.
- Build a retirement account for the parent staying at home. When you choose to be a stay-at-home parent, lost wages and a lack of contribution to a workplace retirement account can prove detrimental to your family’s financial health. However, you can build an IRA for your spouse to ensure they won’t be in financial dire straits in the case of divorce, and allows both parents to save retirement dollars for both people. Because the stay-at-home parent isn’t contributing to social security or a 401k if they aren’t working, thus not collecting compound interest, a spousal IRA could make a huge difference in post-retirement years.