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.