Diana Clement

Your Money and careers writer for the NZ Herald

Diana Clement: Finance doesn't stop for stay-at-homes

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The at-home parent is also saving on childcare costs, which can be huge if both parents are in the workforce. Photo / Thinkstock
The at-home parent is also saving on childcare costs, which can be huge if both parents are in the workforce. Photo / Thinkstock

Whether in or outside the workforce, it's still necessary to plan ahead.

New at-home parents are likely to experience a whole range of emotions around their finances, including guilt and worry. It can be a huge psychological hurdle to go from independent earner to being financially dependent. The at-home parent is also saving on childcare costs, which can be huge if both parents are in the workforce.

Baby brain isn't a reason to forget about your financial future. Stay-at-home-mums (or dads) who put their finances on the back-burner may be setting themselves up for all sorts of financial problems in the future.

Some common symptoms of this ailment include losing touch with your career, failing to know what is happening with the family finances, letting insurances lapse, or giving up on KiwiSaver.

Financial adviser Joanne Robb of All Matters Money recommends that couples give living on a single income a dry run for three to six months before committing to it. During this time, they should live on one income and save the other, she says. The savings could become a very useful emergency fund.

The next step is to have a financial and career plan. Whether you're in the workforce or outside it, it's still necessary to plan for the future and set goals.

It's a good idea to keep KiwiSaver or other retirement savings going while you're out of the workforce, says Robb. If the couple contributes voluntarily to the at-home partner's KiwiSaver, they will still get the maximum member tax credits from the government.

Also make sure, says Robb, that you research the state aid available to families, such as family assistance and childcare subsidies. These payments can help make life on one income more tolerable.

Chances are if you're going from two incomes to one, your new life will be a culture shock in more ways than learning to change nappies and navigate playgroup politics.

New at-home parents are likely to experience a whole range of emotions around their finances, including guilt and worry. It can be a huge psychological hurdle to go from independent earner to being financially dependent. It's worth remembering that if you've been with your partner for three years, your money is viewed as one big pot by the law, not as his money and her money.

The at-home parent is also saving on childcare costs, which can be huge if both parents are in the workforce.

Budget downsizing can be a hard pill to swallow. The at-home parent can "contribute" to the overall family position by taking charge of budgeting and investing where appropriate to make the money go further. Robb says her own sister wishes she'd followed the All Matters Money spending plan throughout her marriage.

Tracking the family finances is much more difficult than it was in our mothers' or grandmothers' day, when the money came in in cash and good budgeters would divvy it up to cover bills, spending and saving. These days there may be numerous credit cards, direct debits, trust accounts, automatic payments and so on. Good financial management is almost a full-time job in its own right.

Inevitably, most at-home parents either want or need to work part-time. There are jobs that the stay-at-home parent can do from nine to three. Most are low-paid and it may be difficult to contain the work to within school, day-care, or even kindy/playcentre hours.

The parenting forums on Trade Me are full of requests from mothers (and fathers) for ideas for home businesses.

Although people posting on online forums may have good ideas, it's not sensible to base financial decisions on what you read. There are some insightful people on Trade Me's community and other forums, but many more who really don't have the first clue about good personal financial planning.

A lot of stay-at-home parents turn to direct selling of products such as Avon and Tupperware. Manukau mum Linda Taurua recommends Avon.

She earns between 24 per cent and 36 per cent commission on sales, depending on volume. Her Avon income helps with the family finances and the work can be done to fit around the needs of her 8- and 13-year-old children.

There are also plenty of rental properties run very efficiently by at-home parents, which contribute income and long-term capital gain to the family.

One popular money-making venture for at-home parents is launching baby-related businesses, such as Snazzipants cloth nappies and Lola & Ben baby sleeping bags. Some have been financially successful.

There is also a legion of at-home parents selling new and used goods on Trade Me.

One of the big long-term financial issues for at-home parents is losing their confidence in their chosen field of work. Many do not feel comfortable about returning to their former career after a break and may take lower-paid work.

Whatever your previous role, it is possible to keep up "currency" during an absence from the workforce, says Jo Mills, general manager of Career Analysts.

"We see many fabulous people who are feeling fairly shaky about returning to work and the value they can still add.

"The best advice we can give is don't put your career 100 per cent on the back-burner," says Mills. "Every few months, consider what you could be doing to keep your career alive in the time you have, and make it happen."

Mills recommends at-home parents keep up to date with changes in their line of work. "If you only have 10 minutes to read the paper, read the business section. If you have 20 minutes on the internet, avoid Facebook and instead look at LinkedIn to see what discussion groups are in flow.

"If you find something relevant, email a link to your ex co-workers/networks. You will find that they return the favour and will continue to see you as active in your field."

Volunteering is another way to keep your career skills current. That can involve anything from doing the books for a voluntary organisation if you're an accountant to running marketing campaigns for a charity. Joining the board of trustees at a local school can help maintain and develop software and management skills.

This approach widens your networks, which may be useful if or when you return to the workforce.

Not everyone can find the time to work part-time or volunteer, says Mills. "[Instead] consider options that work in with your lifestyle, such as mentoring or coaching others, creating introductions for your networks, submitting articles to your employer's in-house newsletter, adding to blogs, or attending ad-hoc networking events/one-off courses."

A significant proportion of marriages and partnerships involving children fail. With this in mind, it's important that the at-home partner understands the family finances and keeps an eye on bank statements.

Both members of a couple should understand how any family trusts work, and the structure of any property investment or business owned by the family.

When businesses go awry, marriages often fail. Business debt is often secured against the family home and other assets, which means both parties can end up financially destitute in the event of a business failure.

They may not even have a deposit for a new home. This can come as a real shock to the partner who wasn't closely involved in the business.

It's also a good idea to have at least one credit card in your name so you have access to short-term credit should you need it. It will also help maintain a credit record in your own name.

Stay-at-home parents sometimes wrongly assume that they don't need any life insurance cover. "Often I hear [husbands] saying: 'she doesn't need any cover, she's not working'," says Naomi Ballantyne, founder of insurance company Partners Life. Life insurance will also pay out in most circumstances if you're diagnosed with a terminal illness.

Another insurance that is important to at-home parents is critical illness (also called trauma) insurance, says Mark Ennis, AMP's general manager of wealth protection. This insurance pays out if you get a serious illness, such as cancer or multiple sclerosis.

Whether it's death or critical illness cover, the pay-out can be used to pay for childcare, house cleaning, nursing care during the recovery phase or even a last family holiday.

It's not uncommon for the working partner to take time off to look after the children following a death or the diagnosis of a critical illness, says Ennis.

- NZ Herald

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