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Stay-at-Home
Economics
By ALEKSANDRA
TODOROVA
Many families believe they just can't get by
on a single income. Consider some evidence from the
2002 census: Out of 19.6 million married couples with
children under 12, only about 5.3 million parents --
5.2 million moms and 105,000 dads -- stayed at home to
care for the kids. Yet in a parenting study done for
Warner Books last year, 87% of the mothers surveyed
said that they would stay at home to raise their
children if they could afford to do so.
"This is an all-too-common
dilemma," says Sheri Iannetta Cupo, a certified
financial planner with Sage Advisory Group in
Morristown
,
N.J.
Here are five tips to make at-home parenting work.
1. See what you'll save.
"The first thing that I realized was there were a
lot of hidden costs to working," says Jonni
McCoy, 45 years old, who 13 years ago decided to quit
her job as a senior buyer for Apple Computer to stay
at home with her then-three-year-old son. Though her
family lived in the expensive
San Francisco
Bay
area and she was bringing home 55% of the joint
income, it wasn't so hard: "A tremendous [amount]
of expenses just disappeared."
The biggest saving was day-care expense.
Also gone were the career-wardrobe and dry-cleaning
bills, along with the almost daily deli and restaurant
tabs. Gasoline and parking costs also dropped now that
she didn't commute, and her car-insurance premium went
down because she switched from commuter to leisure
status, which automatically lowers rates in most large
metropolitan areas. Plus, the couple's tax bill fell
significantly.
"I've met people who [net] less than
they [bring home] because of all these expenses, and
they've never thought about it," says Mrs. McCoy,
who in her spare time runs a Web site for stay-at-home
parents (MiserlyMoms.com).
2. Shrink your budget.
It seems impossible, with a newborn baby. But it's
not. Most people don't have much control over the
electric bill, "but the discretionary money that
passes through your hands, you've got some control
over," says Denise Topolnicki, a stay-at-home mom
and author of "How to Raise a Family on Less than
Two Incomes." Most stay-at-home parents find they
can significantly cut the grocery budget now that they
can spend more time at the supermarket. Others say
that with a baby at home, they eat out and go to the
movies less often.
3. Eliminate debt.
The smartest thing you can do to prepare for at-home
parenthood is to plan it all far in advance. Get rid
of credit-card debt first. It's costly.
4. Have a safety net.
With only one breadwinner, the family should start an
emergency fund -- at least six months of living costs
in an easy-to-tap account such as a money-market fund.
Another way to avoid a financial crunch is to set up a
home-equity line of credit. If you never use that line
of credit, there's no interest charge. If you do use
it, Mrs. Cupo says, "the bank will start to
charge you interest based on what you've written the
checks for." Don't confuse this with a
home-equity loan, where you get the cash (and start
incurring interest) right away.
5. Tweak insurance, savings.
Adjust your life-insurance policies now that the
family depends financially on one parent. Insurance
experts recommend coverage equal to at least five to
seven years' worth of the working spouse's income. And
insurer
State
Farm puts the "value" of a stay-at-home
spouse at up to $70,000 a year when you factor in
child care, chauffeuring and so on. Fortunately,
term-life insurance is inexpensive for people in their
30s in good health.
Save less, rather than nothing, toward
retirement -- if you must pare your 401(k), at least
contribute enough to get your company match. Save for
the kids' college, but not at the expense of
neglecting your retirement. There are means of getting
through college -- "loans and financial aid --
but there's nothing like that to help you through
retirement," Mrs. Cupo says.
And don't forget: Uncle Sam gives some tax
breaks to parents.
Aleksandra Todorova writes for
SmartMoney.com. You may send an e-mail to: letters@smartmoney.com
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