The Math Mistake Families Make Going from Two Incomes to One
The decision for one parent to stay at home can be a difficult choice. The decision can be complicated with career implications, relationships, opinions from family and friends, and even conceptions of self-worth. There is a money component to consider. The financial component is a huge element for many families, but what questions should you even ask to know the impact?
"You shall teach them diligently to your children, and shall talk of them when you sit in your house, and when you walk by the way, and when you lie down, and when you rise." Deuteronomy 6:7 ESV
Deciding to Stay at Home
The decision for a parent to stay at home with children is most often associated with young children. That’s not the only time, though. The decision or question comes up throughout the time when children are living at home. About 1 out of 5 parents in the US stays at home. In a culture where so many people tie their identity to their job, the decision can have many implications beyond financial. There’s also the unfortunate cases of stay home parents who are looked down upon by some folks. You could be doing it to be closer to your children, homeschool, or any number of reasons to benefit your family. All this and more can play into the decision whether it’s a baby or a bellicose teenager that is in question.
The Mistaken Math on the Dual Income to Single Income Transition
Whether it’s a prospective stay-at-home mom or stay-at-home dad, I hear the same mistake often. That mistake is only looking at one side of the “ledger”, from a financial standpoint. The most common approach is to look at the prospective spouse’s income and assume the family will be “worse off” by that amount each year. It makes sense, but there’s other important considerations.
The Hidden Financial Benefits of a Stay at Home Parent
It’s not always obvious at first glance, but one parent staying at home can have some positive financial impacts. The upside is rarely discussed but should be an important part of this decision with your spouse.
Child Care
This is the obvious one, but many families still underestimate. A survey found that more than half of the respondent families pay more than $10,000 per year for childcare. For many families, this expense is one of their largest monthly of weekly bills. Eliminating the expense of childcare can be huge. Even for older children, who go to a program after school, there can be a hefty bill associated with partial day care for your son or daughter.
Possible Lower Taxes
One benefit many families experience by making the transition from two salaries to one is a lower tax bill. A lower overall income on a joint tax return can put your family in a lower tax bracket. This may not seem like a big deal, but the difference in what you pay the IRS or the state you live in can add up quickly by being bumped into a lower tax rate or bracket.
Transportation
The average American drives about 220 miles per week. If one spouse cut out driving to work, from work, and roundtrips to drop off children at childcare locations, what kind of savings would that yield? Don’t just think about gas either. Fewer miles means fewer oil changes, depreciation, overall maintenance, and sometimes lower auto insurance rates.
Less Eating Out
As families, we eat out for many reasons. One big reason is convenience while we’re on the go. If both parents must leave work, go pick up one or more kids, drive home, and then make dinner it’s understandable why eating out is a frictionless choice. A stay at parent who is able to do some cooking in lieu of restaurants can mean a big difference in food costs.
Job Related Expenses
When we work, there’s miscellaneous expenses here and there that add up. Sometimes, it’s fitting in with the dress code at work. Removing the yearly expense of “work clothes” can add to reduced spending as well. If you any other expenses a job doesn’t cover like continuing education, licensing, or professional memberships, there’s additional savings there too.
The Financial Costs of a Stay at Home Parent
Lower Overall Income
While obvious, this factor is not trivial. Depending on the previous income of the proposed stay-at-home spouse, it may be a significant impact. Keep this mind as you “do the math” with your spouse.” Do keep in mind the benefits above and remember it’s not a one to one difference.
Less of a Buffer for a Job Loss
Two sources of income can help make a layoff or other job loss easier to manage. When you have a single source of income for your family, an income interruption can be more challenging. You can plan and overcome this possibility. One way is by having an emergency fund that can withstand a period of time without income. Every family should have an emergency fund, but as a single income household, yours should be even bigger.
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Reduced Benefit Options like Healthcare
Benefits are an important part of your compensation for any job. A big benefit of a dual income household is having choice over benefits like medical insurance. As an example, if the employer for both spouses offers health insurance, you can choose to get coverage with the better of the two options. By going down to a household supported by a single set of benefits, there’s less options available than might be otherwise. You can help mitigate the impact by making sure to get the most out of the options available and making benefits part of the search when considering a job change.
A Word about Part-Time, Gig Work, or other Employment
One other consideration that’s new to this question for parents is how the idea of work has changed. For most of our parents, it was a decision between working 40 hours a week or no hours. We live in an age with many opportunities that don’t revolve around the traditional work week and offer remote or at home ways to make money. There are ways to stay close to home and make money that have never existed before. Keep these kinds of jobs in mind as part of the conversation with your spouse. A two-income family could mean one spouse with a traditional full time job and another spouse with less traditional work load/schedule. Transitioning to a one income family may require some creativity in your particular situation so keep an open mind.
“An ounce of mother is worth a ton of priest.” —Spanish Proverb
Should Mom Stay at Home/Should Dad Stay at Home?
Don’t misunderstand the points above. Adjustments, financial or otherwise, will be necessary if your family transitions to one spouse staying at home. The non-financial benefits can be incredible and life changing. It's important to be thoughtful about how to go from two incomes to one and what's uniquely important to your family. A decision for one spouse to stay at home is also not a permanent choice. It could be the right choice for now and something else might be the right choice later. I hear, much too often, folks who assume leaving the workforce right now means never entering again. Different seasons of life require different decisions for your family. If that means something different for this year versus next year, that is just fine.
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