Many parents face the same difficult question when raising a child. Should one of you stay at home while the other works? It’s not a question to take lightly. The decision can have emotional and financial consequences and may have a long-term impact on the stay-at-home parent’s career opportunities. It’s also a question that doesn’t have a single correct answer.
Your family certainly won’t be alone if neither of you stops working. In 2016, both parents worked in 61.6 percent of married-couple families with children in the U.S., according to the Bureau of Labor Statistics.
On the other hand, a survey conducted in the U.S. in 2016 by the Pew Research Center, a nonpartisan think tank, found that nearly 60 percent of respondents feel that when a child has two parents, the child will be better off if one parent stays at home.
Your upbringing, personality, career and the family’s financial situation can all play into your decision. Your opinion could also differ from your partner’s and may change over time. Perhaps you both worked after having your first child and now that there will be two or more children it makes more sense for one of you to stay at home.
Whatever your impetus, if you decide to switch from two incomes to one it will undoubtedly be challenging. Purposefully approaching and planning for the change could help you succeed.
Get a general sense of the numbers. Understandably, you’re likely juggling a lot of priorities at the moment. However, now more than ever, having a clear picture of your family’s finances can be important. Thinking about both short-term and long-term scenarios will help you understand the effect of moving to one income and give you numbers to back up your assumptions.
For this task, you don’t need to track every single penny or dollar you make and spend (although detailed tracking helps manage your finances and budgeting software and apps can make it relatively easy to do so if you want). Try to get an approximate sense of your household’s cash flow and the non-essential expenses you could cut if need be.
The good news is that saving on daycare (over $25,000 annually in some states according to Childcare Aware of America) and work-related expenses, such as transportation, taxes and meals, can help offset the lost income.
However, you’ll also need to budget for new child-related expenses. Some families downsize their home, sell a vehicle or eat out less often to make their one-income vision a reality.
Take baby steps before the baby arrives. For those who are just thinking about starting a family or are currently pregnant, altering your budget and acting as if you only have one income while both of you continue to work and get paid can help give you a leg up. You can start to adjust while you’re still getting a full night’s sleep and you can put the extra savings to good use.
For example, the second income could go towards an emergency fund that can help you weather a setback after making the transition. You can also use the money to pay down high-interest debt, which can free up some cash flow by lowering your interest payments.
Discuss your new family roles. Having a stay-at-home parent can be as much of an emotional decision as it is a financial one. If you haven’t already, set aside time to discuss how you view each other’s roles in the family. Will the stay-at-home parent have new or additional responsibilities around the house? Maybe there will be new expectations for what the working parent does after work.
Bringing finances back into the picture, discuss how you’ll divide the family budget once there’s only one person working. Will every purchase be a mutual decision? Or, perhaps you’ll both have a personal allowance that you can spend how you please and there’ll be a household account for shared expenses.
Plan for the future. Now may also be a good time to discuss your expectations for the future. When and if a stay-at-home parent plans to return to the workplace for example. And if it makes sense for them to work or go back to school part-time while also taking care of the home.
The stay-at-home parent may also want to contribute to the family’s finances in other ways than full- or part-time job. They could compare your recurring expenses, such as insurance policies and mobile phone plans, to find saving opportunities. Or, once they get into the flow of things, they may be able to deal hunt and coupon to lower the family’s regular expenses.
Much like the big decision, there isn’t a single correct answer to questions about family roles or the future and no one can answer these questions for you. Talk over the options together and realize that you need to try out several ideas before you find the arrangement that works best for your relationship and growing family.
Bottom line: Take a deep breath and embrace the upcoming changes. Switching to a single income can be challenging, but so is having two incomes and a newborn. Planning ahead and working together towards a common goal and vision for your family can help ensure a successful transition.
Nathaniel Sillin directs Visa’s financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.