Can you afford to be a stay-at-home parent?

Choosing to stay at home and being able to watch as your children grow up is a rewarding experience. On the plus side, you get to save on childcare fees and be actively involve in the early years of your kids' development. But on the other hand, losing an income from one parent will have an effect on your family's budgeting and future finances. 

Be prepared for the challenges of stay-at-home parenting and keep your finances in order by following these steps.

When evaluating your finances and coming up with a saving strategy for your family, you can start by listing down the household income of both spouses combined, as well as any side income that you may be earning from investments or others. Removing taxes from the equation will give you your disposable income. On that note, be sure to take advantage of child or childcare tax relief, which helps to ease the burden of a single-income household.

You should also take stock of your current and future expenses, which will change overtime as your child grows. For example, schooling fees, insurance, savings for university and your retirement plans. 

Speaking of retirement, it’s also worth noting that eligible stay-at-home wives can enjoy the same dividend and benefit as EPF members under the i-Suri initiative*. By contributing a minimum of RM5 monthly, the government will match your contribution with another RM40 (up to a maximum of RM480 per year) into your EPF i-Suri savings, on top of the attractive annual dividend that you will receive on your contributions.

To decide whether staying at home is worthwhile, you need to consider the cost-benefit of different financial scenarios. Childcare or nursery fees, in particular, are not cheap. What you lose in income may be something that you make up for in savings from commuting and early childcare fees. Staying at home will also give you more time to cook and to do household chores, which could save on eating out and hiring domestic help.

Perhaps your finances are sufficient for you to be a stay-at-home parent now, but once the child gets older, they may need more financial support that require you to return to work. In this case, taking a sabbatical instead of permanent resignation could keep doors open for you in the future.

If you’ve decided staying at home is the way to go, then it might be good to start planning a monthly budget for your family. This may require some rearrangement of priorities to ease your monthly cash flow - you can list down your needs and wants (necessary expenses vs. discretionary expenses) and use this to determine how much is needed to guide you to prepare for your family's financial future. 

One thing to remember is to ensure that you have a strong contingency fund to fall back on. With one less income in the household, any emergency will have greater impact.

To supplement the household income, you can explore remote working or part-time opportunities such as data entry jobs or starting a small business for some side income. These often do not have fixed working hours so you can build flexibility around jobs that fit your schedule. 

Life insurance or Family Takaful can be useful if the breadwinner can no longer provide an income for the family. For a stay-at-home parent, staying protected with insurance or takaful can be a great source of financial comfort. You’ll also be giving up your employee health and medical coverage when you leave the workforce. Check if you can get family coverage from your spouse’s employee insurance plan.

Full-time parenting is one of the toughest jobs in the world. Go into it fully prepared with the necessary financial stability. Discuss these financial matters with your partner – and use the points in this money talk guide to make the decisions together.