Financial Management for the Stay at Home parent

Many people especially women make the decision to stay home and raise children.  I met some people this last weekend during an event to celebrate International Women Day celebrations who were precisely doing that and were wondering where financial management for them would come in.  I ended up having a chat with them and here are some of the insightful tips that came out of that conversation.  I cannot take credit for all the information here and in fact I found myself learning a lot from the amazing women that I met. Firstly and according to these women I was conversing with, realise that you are working.  Most people who make the decision to prioritise raising of the family don’t realise they are in a job.  It may not be in formal employment or going to a business every day.  You may not get a paycheck at the end of every month but raising children is no less of a meaningful job than reporting to an office everyday.  However most women will define themselves as not working.  When you believe, what you are doing is not a job then it becomes very hard to become part of the financial decision making in your household.  So the first thing most women have to actually come to terms with is the fact that it is a job. A job that deserves no less recognition than your partners job in the official workplace.

Once the fact that it is established that you are indeed working, agreeing on financial matters becomes easier. This is because you now know you are not approaching this conversation from a point of disadvantage, something many people have felt over time. The foundation here is that if it was a joint decision that one person should stay home and look after the children, then the other corresponding decision should be that money management, discussions and decisions will be a joint affair. One of the ladies I spoke with put it in these exact terms – “If my efforts are going into raising our children, your efforts are going into earning our money”. If you are about to stop working then ensure that this conversation is had and agreed upon. Do not assume it comes automatically. If you never did have this conversation and feel disadvantaged when it comes to money decisions, the solution starts with this discussion. Remember the value that someone brings into a family is not simply driven by how much money they earn.  Once this foundation is established, you can then work out the practical things you can do. Every relationship is different so do come up with the system that works for you. If you find the system doesn’t work, change it. Different people have done different things.  You can completely operate the funds as joint i.e. “the salary” comes into a joint account and withdrawn for the various needs i.e. household expenses, investments, personal expenses etc. Some people feel that they still need a certain level of independence. That is to stay, as much as you are operating joint finances, you don’t want how much you spent at the salon examined with a magnifying glass. You can decide from the salary what goes into personal accounts for personal expenditure plus any bills every person is responsible for.  For example if you are responsible for getting the electricity paid, and I mean the physical effort of paying it, then it may make sense that the money for electricity goes into your account. According to another of the ladies I was with, paying bills despite the fact that you did not directly earn the income, goes a long way into creating the assurance for both parties that the stay at home parent is contributing financially. It also ensures that you remain financially in tune with the household budget realities.  When you are completely not handling bills (or not handling payment of the “needs”) you may have a skewed view of what financial resources are available for the “wants” in your life. You may think there is more or less money than what is actually available. This creates immense burden on the person earning the income.  I have met many men who have gone into debt just to please their spouses who do not understand the limitations of how much money they have at their disposal. Being on the same page creates easier conversation.

If you can get this conversation right you may find yourself at a huge advantage. I personally know a couple lets call them James and Maria.  Maria stayed home when they had children.  James earned the income but Maria used her time to research, learn, and network so that they could build investments.  She formed relationships with banks that enabled them to access credit for some of the investments.  Their investment portfolio has grown to the point that they have even hired an investment administrator to manage it. Effort is just as important as income. Even if James stopped working today, their investments would be able to sustain them.  Deciding to work at raising a family does not mean you are not economically productive.  Especially when your children do not need you quite so much you can decide what the next steps are for you. The same skills you have used in raising a family are the same skills that can be used when you are ready to do what Maria did and invest, start a business or even go back to work.