Affording stay at home parent

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chak
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Affording stay at home parent

Post by chak » Fri Sep 13, 2013 11:27 pm

I am a long time forum reader and this is my first post. I appreciate any advice on how we should evaluate the decision of my spouse to be a stay-at-home parent. We are fortunate to have a high income with a marginal federal tax rate of 35%. My income is about 77% of it. Even without my spouse working for a salary, we will be able to afford a good living. However, it will impact our overall savings with a reduction of 22%. We like the option of stay-at-home parent until the our youngest kid goes to college, which is 14 years away. But, we are concerned about risks of single income and sufficient retirement savings. Since my spouse works as a software developer, it will be hard to get back into career after a long break. I am 39 years old and my spouse is 35 years. We have about $500K in investment accounts and $500K in home equity. Given the time to our retirement (20-25 years) and good income, we are inclined to make the decision for my spouse to be a stay-at-home parent. Do you think we are making the right decision for the family while managing the financial risks for a successful retirement? Thank you for your feedback in advance.

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Dale_G
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Re: Affording stay at home parent

Post by Dale_G » Sat Sep 14, 2013 1:05 am

The devil is always in the details, but it appears that you can have a stay at home parent for some period of time and still meet your retirement goals.

But I question the need for the stay at home parent to hang around until the youngest leaves for college. That isn't parenting, it is hovering :D

What is the stay at home parent going to do - put cookies and milk out for the senior year high kid when he/she gets home from school? Kids need some space - and they need the opportunity to mess up.

I am sure there will be a variety of opinions.

Dale
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chak
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Re: Affording stay at home parent

Post by chak » Sat Sep 14, 2013 2:28 am

I hope that there is more to parenting than putting cookies and milk:) We have a lot of focus on well rounded upbringing and academic rigor for the kids to set them up for success in life. If we feel that there is not enough need to be around the kids in their high school during work hours, we can change the plans at that time. Thanks for your feedback.

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frugaltype
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Re: Affording stay at home parent

Post by frugaltype » Sat Sep 14, 2013 6:30 am

I always like to suggest that someone dropping out keep their options open with part time work. That's hard to do with software development, though.

What happens if you get run over by a truck, do you have enough insurance to provide for them for the kids until they're through college, and your wife taking into account that she may not be employable at anywhere near her current salary?

carolinaman
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Re: Affording stay at home parent

Post by carolinaman » Sat Sep 14, 2013 7:03 am

I think it is great for couples to make the decision for a stay at home mom when they can afford it. It sounds like you are in that situation. My wife and I did it and we are glad we did. My daughter is a stay at home mom and I do not see how she could work, keeping up with her 3 kids, ages 15, 12, and 10. It really is a question of priorities and it sounds like yours are about your family. Your retirement assets are good for your age and can grow a lot over the remainder of your working career. Once your children are on their own, your disposable income will increase a lot, enabling you to accumulate retirement much faster, plus your wife can work and add to that.

In order to keep your wife's technical experience current, one option would be parttime work in her field. Her options will be more limited but she should still find opportunities. I managed a large IT organization the last 22 years of my career and we used a few parttimers during that time.

lwfitzge
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Re: Affording stay at home parent

Post by lwfitzge » Sat Sep 14, 2013 7:28 am

WE've never had a full time stay at home parent but my wife and I have taken turns over our career being part-time as home-based/employed parents. We have an 11 year old and a 16 yr old. I the last 5 years for example, my wife has exited work, gone to school part-time and worked part time in the midst of a career change. In the last year she returned full time to work and I exited corporate life to consult part-time and now looking to start up a new company and re-enter full time next year. No doubt our kids benefited from the extra time but neither us suffered professionally. We personally derive a lot of life satisfaction at least being partly employed so exiting was not an option even if financially it was possible. Second, the risk to reengaging the workforce is dramatically hindered if you are out of the workforce entirely for big stretches and your talents or skills are lost over time or are perceived by employers to be lost. Last, I've seen too often (and its been written about in the press) the negative financial effect of divorce on stay at home parents (sorry to be a bummer but you are in your 30's, look up the divorce rate, it's not tiny). Yes, the breadwinner loses big as well in settlements, but the parents out of the workforce find it difficult to reenter and make a "good" salary in the range they would have earned had they not fully exited the workforce. This all come down to your choice. We chose part-time employment and keeping both parents careers flexibly employed especially if both can fall back on great incomes. Good luck :D

the.fluffy.bunny
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Re: Affording stay at home parent

Post by the.fluffy.bunny » Sat Sep 14, 2013 8:00 am

Well, it really is a matter of priorities. When we married it was with the intention of raising a family. I had many years of experience teaching children recreation classes and I could always tell on the first day of class which children came from single parent households, which children had a daddy in their life, those who came from two parent intact households, those children who went to private schools, those who attended public schools and those that were home schooled. My woman (yep I am possessive, and she likes it that way) had a Masters Degree and elected to devote herself to raising a family. We also elected to home school, not for religious reasons but to deliver the highest quality educational experience possible and allow our children to learn at their natural rate. As a result our children entered college when they were 14. The oldest is now 19 and graduating from a good university with a Math degree and a perfect 4.0 GPA. Wee know many people who home schooled, and while there children may not have started college at 14, they did achieve a high level of academic and social success. Most started college when they were 16 or so.

My wife has no regrets. And I can tell you as a man, working hard to provide, there was nothing like getting in from the airport and seeing her laying on floor with the children’s heads on her belly reading to them and inhaling the scent of fresh baked chocolate cookies when you came in the door. The best tonic for dealing with work related frustrations was coming home to a wife who was not worn out and haggard, giggling children, and a house filled with love. There just are some thing money cannot buy. Electing to have a stay at home mommy may have cost around 2 million dollars in foregone nominal income, but it also allowed me to concentrate on earning more than your average man, because I knew the children were being cared for.

You go around once in life, the children grow up so fast. I would highly encourage you to consider having a stay at home parent and also look into home schooling. Talk to home schoolers and avoid falling victim to the stereotypes propagated by the teacher unions and those with a vested interest in maintaining the status quo. It is not for everyone, but frankly I have yet to meet a woman who does not take to nurturing and educating her children like a duck takes to water. It is a very natural thing to do. And as a man, all I can say is it is a beautiful thing to witness.

In the end, I would suggest you really think about what you feel the purpose of life is, what you value, and set your priorities accordingly. You are only going to walk this way once.

Excelsior…
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livesoft
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Re: Affording stay at home parent

Post by livesoft » Sat Sep 14, 2013 9:14 am

I would think that any decision made now can be changed at any time.

Some examples from my own life:

I have employees who only work in the mornings. They have kids in school and in day care.
I work only part-time myself although my spouse works full-time. We have always done tag-team parenting, so one of us has been available for all kinds of things.

Kids become fairly independent by age 12. While I think my kids like me (Dad, let's go to the gym. Dad, help me with my homework. Dad, what's to eat? Dad, let's go get some pizza. Dad, I need your sportcoat for senior pictures. Dad, what did you do with the clothes you washed for me? Dad, can I take the car to Austin this weekend?), that's doesn't mean they need me to be around all the time. My point is that when the youngest is in school, I am not sure what a stay-at-home-parent does that a maid could not do.

And I made chocolate-chip cookies on Thursday from scratch at 1:30 pm in the afternoon and took them to work at 2:30 pm.
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Alexandria
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Re: Affording stay at home parent

Post by Alexandria » Sat Sep 14, 2013 9:52 am

the.fluffy.bunny wrote:

My wife has no regrets. And I can tell you as a man, working hard to provide, there was nothing like getting in from the airport and seeing her laying on floor with the children’s heads on her belly reading to them and inhaling the scent of fresh baked chocolate cookies when you came in the door. The best tonic for dealing with work related frustrations was coming home to a wife who was not worn out and haggard, giggling children, and a house filled with love. There just are some thing money cannot buy. Electing to have a stay at home mommy may have cost around 2 million dollars in foregone nominal income, but it also allowed me to concentrate on earning more than your average man, because I knew the children were being cared for.

You go around once in life, the children grow up so fast. I would highly encourage you to consider having a stay at home parent and also look into home schooling. Talk to home schoolers and avoid falling victim to the stereotypes propagated by the teacher unions and those with a vested interest in maintaining the status quo. It is not for everyone, but frankly I have yet to meet a woman who does not take to nurturing and educating her children like a duck takes to water. It is a very natural thing to do. And as a man, all I can say is it is a beautiful thing to witness.

In the end, I would suggest you really think about what you feel the purpose of life is, what you value, and set your priorities accordingly. You are only going to walk this way once.

Excelsior…
I agree very much with this post. At which time I am often called a sexist pig. :D But, actually, I am a working mom and my spouse has stayed home since I was pregnant with first child. Our "plan" was to have him home a few years and probably didn't come out too behind anyway those years because we saved a substantial sum on taxes and did not have to pay absurd childcare sums. He was actually laid off a year before he planned to quit though and the economy has not helped things, so very unexpectedly my spouse is still home after 11 years. For all of the reasons above, I would not change a thing. I am sure we would be MUCH richer in dollars if he had worked all these years, but in the end though being very fiscally conservative types, our feeling is that this has been one of the best decisions of our life, on a personal level. (Or maybe more of a "life happened to us" than a decision...).

I have also never found that the finances work the way as perceived. It's not as simple as you lose 22%. Your spouse can economize at home. There will be cost savings without working. You may find some substantial tax savings (maybe not at your income level). But, what is usually overall missed is that the support of a stay-home spouse cam be invaluable to the breadwinners' career. When I have friend trying to wrap their brain around how we gave up 50% of our income (it was 50% in our case) I tell them not to bother. It's kind of impossible to explain. That 50% would have mostly gone to daycare and taxes in the short run, and has been made up with creativity and other factors, in the long run. There is no way we could live on as little as we do right now if we were both working. We'd be caving to more conveniences, and would have the expenses that come with working (commuting being a biggie). & I am sure there would probably be some stress spending and so on.

You have received a wise comment: Make sure to have ample life insurance and arrangements for worst case. Disability insurance and life insurance is a must, in my opinion, given our scenario. Our net worth is not on the large side yet. Your mileage may vary. My spouse had a major medical thing a few years ago and I would get comments about how if it was me we would have been financially ruined. :oops: Stuff like that is catastrophic if you don't have a plan or insurance, and I will admit most people don't have a plan.

ETA: I presume the question is asked because the parent WANTS to stay home. Lord knows I have no desire to be a stay-home parent, and talking about the positives of a spouse at-home in no way shape or form means that it is for everyone.
Last edited by Alexandria on Sat Sep 14, 2013 10:01 am, edited 1 time in total.

Chitownlady
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Re: Affording stay at home parent

Post by Chitownlady » Sat Sep 14, 2013 9:53 am

What does your wife want to do? What do you want? Is what you want worth delaying your retirement / having less in retirement? No one can answer these questions for you.

As an aside, as a woman who has chosen to work (could have been a SAHM but do not want to), I find the.fluffy.bunny's response pretty offensive. Working does not mean you love your kids less. In my case, we are all better off since I work. Among other things, working is very fulfilling and makes me happy and happy mom generally equals happy family.

Hyperion
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Re: Affording stay at home parent

Post by Hyperion » Sat Sep 14, 2013 10:20 am

Chitownlady wrote:What does your wife want to do? What do you want? Is what you want worth delaying your retirement / having less in retirement? No one can answer these questions for you.

As an aside, as a woman who has chosen to work (could have been a SAHM but do not want to), I find the.fluffy.bunny's response pretty offensive. Working does not mean you love your kids less. In my case, we are all better off since I work. Among other things, working is very fulfilling and makes me happy and happy mom generally equals happy family.
+1

I have no doubt that there are plenty of examples where a SAH parent works out best for that particular couple. But the general gender-imbalance of the situation in large is fraught with stereo-types and male superiority.

Worse than that, too many women do not think carefully enough of the consequences of extended absence from workforce combined with the very real possibility of future divorce before being pressured into staying at home. The pressure is sometimes subtle and more internal/societal than spousal, but it is definitely there. The bottom line is that if you are not prepared to stay home, you shouldn't expect your spouse to. Even if she says she wants to, ask again - mothers do too many things because they feel judged or they feel they should, not because they really want to.
Last edited by Hyperion on Sat Sep 14, 2013 10:31 am, edited 1 time in total.

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dandan14
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Re: Affording stay at home parent

Post by dandan14 » Sat Sep 14, 2013 10:28 am

There are really 2 parts to this calculation -- the monetary and the intangible. The monetary part is very easy to quantify. Run some calculations on your current savings and new savings rate with a stay at home spouse. Use a monte carlo calculator to figure out what this will do to your long term savings. With her at home, your cost of living may be reduced considerably.

On the intangible side, it is much more difficult to quantify. What is the value of having mom at home? Not only will she be able to focus on the kids, but she can also make the time you are at home much more enjoyable. For example, when my wife worked, we split a lot of household chores. Now that she stays home, most of those chores are in her daily routine.

I was bringing home about 75% of our total. My wife decided to stay home. Now with kid #3 on the way....I wouldn't have it any other way.

chak
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Re: Affording stay at home parent

Post by chak » Sat Sep 14, 2013 11:40 am

Thanks everyone for thoughtful feedback. If finance is not an issue, my spouse would not go for a job, instead focus on the kids and family. I want to make sure that we have a good risk management in place is enable this dream. It seems like the right thing for our family needs as it is quite stressful with both parents working in demanding careers. I know that there are some super parents who manage work and family quite well, but I am afraid that we are not one of them. We hope that this change provides the best home environment while allowing me to focus even more on my career which is doing quite well. Here are some of the themes I am seeing in the feedback.

Insurance: Make sure that we have sufficient life insurance and disability insurance for both parents. I have about $2.5M in life insurance, $1M accidental insurance, and 60% disability insurance from my employer. We got a great medical insurance with high deductibles/HAS from my employer that covers the entire family 100%. My wife will need to get some life and disability insurance once she leaves her employer to make sure that she is covered. Any other insurances we should consider or insurance levels recommended?

Option to Join the Workforce or bring income: Since my spouse is in a technical field, it is difficult to rejoin the workforce after a long break. However, there are ways to make it easier with occasional contract/part time work or getting certificates/going to school before coming back to work. There is always the option of starting a small business on side, but it might be less risky with an employment as software developers are generally paid well.

Divorce: Regarding the risk of divorce that was mentioned, we have been happily married for close to 15 years and we both do not believe in the concept of divorce no matter what the challenges we may face. We are committed to each other for life:)

If we think through these themes a little more and plan well, I am confident that we can have a good family life and financial success with a stay at home parent option. If you have any additional feedback or perspectives on what we should think about, please let me know. Thank you for helping us make this important decision.

katsmeow
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Re: Affording stay at home parent

Post by katsmeow » Sat Sep 14, 2013 12:00 pm

I am a mother of 3 children, the youngest a senior in high school.

Currently I am working minimal hours from home and we homeschool our youngest child. At other times I've either worked full-time or reduced hours.

I do think that for a woman not to work enough hours to qualify for significant SS on her own - not just the 50% spousal benefit - puts the woman at jeopardy. Yes, I know you say your marriage is solid and you don't believe in divorce. However, plenty of women have relied on that to their detriment. I personally believe it is a foolish risk to take.

There is a lot I could say about why I feel that having one parent be stay at home for the entirety of a working life is not good for that parent and unfair to the other parent. However, reading your most recent post, I don't think you are really open to any argument for that point of view. I do understand being at home with kids, but I think that options for part=time work or work from home will provide more security for your wife, is fairer overall, and - a point a rarely see mentioned - presents a more positive role model for your children.

chak
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Re: Affording stay at home parent

Post by chak » Sat Sep 14, 2013 12:36 pm

katsmeow wrote: I do think that for a woman not to work enough hours to qualify for significant SS on her own - not just the 50% spousal benefit - puts the woman at jeopardy. Yes, I know you say your marriage is solid and you don't believe in divorce. However, plenty of women have relied on that to their detriment. I personally believe it is a foolish risk to take.

There is a lot I could say about why I feel that having one parent be stay at home for the entirety of a working life is not good for that parent and unfair to the other parent. However, reading your most recent post, I don't think you are really open to any argument for that point of view. I do understand being at home with kids, but I think that options for part=time work or work from home will provide more security for your wife, is fairer overall, and - a point a rarely see mentioned - presents a more positive role model for your children.
Thanks for sharing your perspective. Contrary to what you might have assumed, I am open to different points of view and I welcome it. Please do share more if you have additional feedback to share. You make some valid points and if we find ways for my spouse to keep her skillsets fresh and earn some income either through a part-time job or work from home situation, it might offset for some of the risks you have mentioned. Regarding being a positive role model, I don't want to get into an argument on whether stay-at-home parent is a bad role model as I don't believe it is the case, but my spouse is well educated (MS in computer science) and is choosing to focus on family as a choice and she is quite capable of earning a living and contributing to society in many ways. But, I see your point about SSN and ability to generate income, and I agree that we need to plan for them. Thanks

Hyperion
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Re: Affording stay at home parent

Post by Hyperion » Sat Sep 14, 2013 1:15 pm

Normally I wouldn't bother posting again, as you seem to have your mind made up. But this topic touches a nerve as a family member is going through a painful divorce right now, after quitting her corporate career to stay home for 15 years, with a Ph.D in Economics from MIT. Divorce is generally one of those things that only happens to other people. The problem with SAH is that when it doesn't work out, it is the stay-at-home parent who pays most of the price. Besides divorce, other things like isolation from adults, lack of fulfillment from work/career, drudgery of chores, can all contribute to unhappiness.

It is important that your wife (and you) understand that she is taking more risk than you are by entering into this arrangement. I wish you luck!

chak
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Re: Affording stay at home parent

Post by chak » Sat Sep 14, 2013 1:20 pm

Hyperion wrote: It is important that your wife understands that she is taking more risk than you are by entering into this arrangement.
I will leave it to my wife to make the final decision. She is reading this valuable thread to understand all the pros and cons. Thanks.

jackholloway
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Re: Affording stay at home parent

Post by jackholloway » Sat Sep 14, 2013 2:02 pm

chak wrote:
Hyperion wrote: It is important that your wife understands that she is taking more risk than you are by entering into this arrangement.
I will leave it to my wife to make the final decision. She is reading this valuable thread to understand all the pros and cons. Thanks.
SAHM can work very well. It did for us thus far.

My wife has a technical background and worked IT. For the first three years of our daughters life, she worked part time, primarily for insurance. She worked part time contract for three years after, but hen the company she contracted with ran into hard times, she stopped, and we now depend solely on my income. This has worked well for some years.

We did make ure that we had a year's actual net in totally safe assets, and quite a bit if insurance when we made that call.

She, and I, would not have it any other way, but when my daughter hits middle or high school, I expect she will make some changes. There are far fewer ways to be part of the school experience after that. At a similar time of life, her own mother got an advanced degree. This came in quite handy when her parents split, and while we see no major risk of that, we do see advanced degrees as a good way to re-skill and to increase safety. They are also a way to get more contact with the technical professionals that keep you sharp.

I would not be totally surprised if she ends up doing nonprofit work that fits skills and background. There are causes we both believe in, and that could use someone of her caliber working on. At the moment, though, we are more interested in whether it is interesting, worth doing, and provides good résumé fodder than in the compensation.

Doing something on the side is a great idea for most, but make sure you both agree that the proposed part time job is worthy work. Working a job for the sake of minimum wage probably will not add, but doing the exact same job for the safety, the benefits, the human contact, or the trajectory just might. A friend's wife found Starbucks very congenial, while a different friend found McDonalds almost tore their marriage apart.

In sum, plan for the long term, save lots for a rainy day, do what you feel is right, communicate more than you think you need to, and accept that you might have to change plans.

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Watty
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Re: Affording stay at home parent

Post by Watty » Sat Sep 14, 2013 3:52 pm

My income is about 77% of it.
Be sure to do a dummy tax return to see what the after tax reduction is since there may be some things like income based phase outs that are not obvious and the after tax reduction will likely be a lot less than 23%. The extra exemptions and possible child tax credits may help maintain the pre-kid income levels.

You can also use tax caster to quickly get a rough idea of your taxes in various situations but that will not show you the impact on your state taxes.

You can also look at the percentage reduction as what percent of your disposable income is being reduced since in a lot of ways that has a lot more impact.

In trying to plan what childcare will look like there are lots of options for very young kids and even grade school kids but when they get older figuring out what a middle school or high school kid should be doing gets hard to plan.

Having a teenager be at home alone for a few hours after school is one thing but when it some to summers and long school breaks leaving a kid home alone for long periods of time is asking for problems. This isn't just about things like sex and drugs but also for things like having them being glued to the TV or video games all day.

You will often hear people say that they will stay home when the kids are little then go back to school but a case can be made to use daycare when they are little and there are lots of good options, and then staying home with them when they are older.

chak
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Re: Affording stay at home parent

Post by chak » Sat Sep 14, 2013 4:16 pm

jackholloway wrote:In sum, plan for the long term, save lots for a rainy day, do what you feel is right, communicate more than you think you need to, and accept that you might have to change plans.
This is a good piece of advice. We are planning to keep about 10 months of expenses in emergency funds and rest of the savings in index funds to give us sufficient liquidity for rainy days. Thanks for sharing your story and perspective.

chak
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Re: Affording stay at home parent

Post by chak » Sat Sep 14, 2013 4:35 pm

Watty wrote: Be sure to do a dummy tax return to see what the after tax reduction is since there may be some things like income based phase outs that are not obvious and the after tax reduction will likely be a lot less than 23%.
You are right. The after tax income & 401K savings are only decreasing by 21% which is almost same as the reduction expected in overall savings.
Watty wrote: Having a teenager be at home alone for a few hours after school is one thing but when it some to summers and long school breaks leaving a kid home alone for long periods of time is asking for problems. This isn't just about things like sex and drugs but also for things like having them being glued to the TV or video games all day.

You will often hear people say that they will stay home when the kids are little then go back to school but a case can be made to use daycare when they are little and there are lots of good options, and then staying home with them when they are older.
We are thinking along these lines as well. Both of our kids are almost out of day care with the youngest one in pre-K. Our kids already went to day care full time and we are not considering stay-at-home option for saving costs as we are probably out of the stage with most childcare costs. Thanks for your feedback

SteelPenny
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Re: Affording stay at home parent

Post by SteelPenny » Sat Sep 14, 2013 5:44 pm

It seems that most of the people touting how well SAH worked for them and their families are tending to be the people who are at work. Of course, the SAH spouse might feel the same way, but it's possible that the SAH spouse isn't as happy as the working spouse believes he/she is. The SAH spouse might keep this from the working spouse due to pressure to conform to societal norms and appear happy with the state of the family. Not saying this is the case for the posters in this thread, but would be interesting to hear from more SAH parents in this thread to get an interesting perspective.

Jeanz
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Re: Affording stay at home parent

Post by Jeanz » Sat Sep 14, 2013 7:24 pm

For a woman who is thinking of becoming a stay-at-home mother, I would suggest very seriously that she avoid a gap in her resume. I was able to do this forty years ago by taking on serious volunteer work and going in for further education. Even so, returning to the job market was difficult and stressful; I had to change careers, and I needed a bit of luck as well. I became a software developer when I was forty, but I rather doubt that the same thing would be possible right now.

Could you consider working with your current employer to develop part-time possibilities, or could you work at home with a nanny to take care of the children? I loved being at home with the children when they were young, but it is a risky choice, not just for the parent, but for the entire family, since you lose the security of the second income. Keep in mind what your next step will be, and if you don't work, consider working (slowly) toward a second master's degree or toward a certification in your field.

travellight
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Re: Affording stay at home parent

Post by travellight » Sat Sep 14, 2013 7:49 pm

I don't think you can generalize and say that you can spot the kids coming from two parent homes, SAHM homes, or working mom homes... at all. I worked while I raised my son as a single mom but was able to volunteer and be in his classroom throughout elementary school more than SAHMs.

There are different pathways to successful outcomes. I frankly do not see how much time is needed though once they are done with elementary or middle school. My sister took this route and never returned to the workplace. She is an MD and her youngest is now in college.

Bob's not my name
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Re: Affording stay at home parent

Post by Bob's not my name » Sun Sep 15, 2013 4:49 am

chak wrote:
Watty wrote: Be sure to do a dummy tax return to see what the after tax reduction is since there may be some things like income based phase outs that are not obvious and the after tax reduction will likely be a lot less than 23%.
You are right. The after tax income & 401K savings are only decreasing by 21% which is almost same as the reduction expected in overall savings.
I can't make sense of your numbers First, if your after-tax income and 401k savings from the second income decrease 21% your savings have to decline by much more than 21% unless you are saving 100% of the first income, which of course makes no sense. Perhaps you switched from percent to dollars in mid-sentence?

Second, are you sure you're estimating your tax cost accurately? The 35% federal bracket is quite narrow thanks to the ATRA, and if you're in it you are subject to some other tax effects. To be in the 35% bracket while maxing two 401k's your gross income has to be in a range that is something like $480,000 - $530,000 (we can't be very accurate without knowing the number of children or the amount of itemized deductions). Because the range is narrow, most of your spouse's income must be in the 33% bracket, with just a little spilling into the 35% bracket. For example, she might be making 23% x $500,000 = $115,000, with only the top $20,000 in the 35% bracket.

In this income range, her wages would also be subject to the personal exemption and itemized deduction phaseouts of the ATRA. The former adds 1% per dependent to your tax rate, or 4% for a family of four. Since your gross income is around a half million you should be above that phaseout, but you'll drop well down into it if you give up the second income. The latter adds 1% to your tax rate.

Then you have the Medicare 1.45% payroll tax.

Then you have the 0.9% ACA tax on wages.

I think your total federal marginal rate must be over 40%. No state tax?

Then you have to look at the cost savings of not working. At your tax rate, every dollar you save is equal to almost two dollars earned. If you buy one fewer cars over the next two decades that can compensate for, say, $50,000 of lost gross income. If once a month you eat dinner at home when previously you would have taken the family to a restaurant that can easily save $20,000 of lost gross income over the period you're considering. If you do home improvement and maintenance yourself instead of paying someone to do it you can save tens of thousands. A $115,000 job pays about $60/hour, but after taxes it's $35/hour. I figured out we were paying a maid service about $20/hour. They had overhead cost associated with travel time and cost and the cost of running their business, but I don't have those costs, so if I do the cleaning myself I can make about a $35/hour equivalent gross wage -- that's not $60/hour, but it's a good wage for something you can do in your own home on your own schedule.

When you are in a high bracket giving up 23% of your gross income often translates into giving up less than 5% of your net income.
Last edited by Bob's not my name on Sun Sep 15, 2013 6:30 am, edited 1 time in total.

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Re: Affording stay at home parent

Post by frugaltype » Sun Sep 15, 2013 6:26 am

the.fluffy.bunny wrote:...I had many years of experience teaching children recreation classes and I could always tell on the first day of class which children came from single parent households, which children had a daddy in their life, those who came from two parent intact households, those children who went to private schools, those who attended public schools and those that were home schooled. My woman (yep I am possessive, and she likes it that way) ... And I can tell you as a man, working hard to provide
Your mental powers about children you knew for an hour or two are stunning. As to the rest, is this 1813? Not 2013?

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Re: Affording stay at home parent

Post by frugaltype » Sun Sep 15, 2013 6:36 am

travellight wrote: I frankly do not see how much time is needed though once they are done with elementary or middle school. My sister took this route and never returned to the workplace. She is an MD and her youngest is now in college.
Yikes. Without addressing the issue of training to get up to date, I'm sure there are plenty of clinics in low income areas that would welcome a doctor on staff.

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Re: Affording stay at home parent

Post by Rodc » Sun Sep 15, 2013 9:51 am

Without carefully reading the responses I would say this is deeply personal, more so that economic.

Somethings to think about.

I know women who really are wired to stay at home and others who are not. Both can be great moms, and frankly both can be terrible moms, and everything in between. It is important to really think hard about this one and to be honest with one's self. It can be hard for some women to admit they just aren't wired to be 24/7/18 years moms and homemakers.

I know some women who ended up having a lot of trouble moving from being "important" people in high power jobs to being stay at home moms. Some became hyper helicopter parents, others ended up very depressed. Some cope by attacking working moms to make themselves feel better and to justify their choices. Of course others did very well. Nothing universal here, just something to think about and watch for.

I also know a couple of women who became deeply depressed after the kids were grown. Not too unlike men who fall apart after retiring as in both cases they can feel like Now What? I have no purpose in life. Again, not at all universal, something for us all to guard against as all jobs paid and unpaid eventually come to an end. Part time paid or non-child centered volunteer work can help a lot (not PTA or things that will stop after children are grown).

Chance are very high that if she steps out of the workforce for something like two decades, she will never have a professional job or contribute meaningful to family finances, college funds, or retirement. Basically staying home for that long is a decision to opt out of any real paid career for your entire life. Again, not universal, but you should plan on it and be pleasantly surprised if it turns out otherwise.

From her point of view, how does she see this working out if you should get a divorce? Of course you don't plan on it, no one does. But worth considering as many find out.

My personal read of this is that on the whole the risk reward trade off is likely maximized with a rather shorter stay at home and at least part time professional work.

These are deep and challenging decisions without no perfect or clear answers. So I wish you luck and hope things work out well however you decide.
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Re: Affording stay at home parent

Post by Jeanz » Sun Sep 15, 2013 11:00 am

One thing many women of retirement age regret is losing the opportunity to maintain their own retirement benefits. Divorced women, especially, are likely to find the half Social Security benefit inadequate, and, given a reasonable divorce arrangement, their ex-husbands and any subsequent wives suffer financially as well. Without a divorce, a married couple where both partners had some kind of professional employment is likely to have two benefits near the maximum and two 401(k)s, occasionally two pensions.

It takes a lot of housework and cookery to make up for the loss of a professional salary. The only major expense that you save on is child care, and these days most people send children to preschool even with a stay-at-home mother. Time home with a baby or a toddler is precious, but that needn't mean giving up a career entirely, certainly not for eighteen or twenty years. It might just be a slightly different career -- a woman with a master's degree in computer science might be able to teach evening classes at a community college while her children are young, for example.

Edited to add a link to a relevant New York Times article:

http://www.nytimes.com/2013/08/11/magaz ... d=all&_r=0

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Re: Affording stay at home parent

Post by J295 » Sun Sep 15, 2013 1:00 pm

A few observations from a 54 year old who has been joyfully married 31 years and we have three adult children.

1. There is no right or wrong decision on this sensitive issue. I suspect that most people having to make this decision deep down know what is "right" for their situation, but it is a bit scary so they appreciate some dialogue. Ultimately though, we each must decide, and "you can't follow your own path if you are on the road to another person's city."
2. We tried having both spouses work after #1 was born and it didn't fit for us.
3. Having a stay at home parent was fantastic for our family. We would do it all over again the same way.
4. If one person isn't working outside of the home then income goes down. It's that simple. That worked out fine for us.
5. Children can benefit from parenting just as much, and in some situations more, as they get older. It's not hovering or helicopter parenting, it's having a relationship established so that when some larger issues surface in the high school/college years the children and parents are all comfortable sharing and parents can provide perspectives as the young adults problem solve and navigate their situations. Our experience resulted in very close relationships and, at the same time, ndependent children (we are in the middle American and they are now in Texas, California, and Spain).
6. Who knows what the future holds? You decide, you move forward, and if it becomes necessary to take some different paths along the way you do that too.

Best of luck to the OP and family.

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Re: Affording stay at home parent

Post by island » Sun Sep 15, 2013 1:24 pm

the.fluffy.bunny wrote:And I can tell you as a man, working hard to provide, there was nothing like getting in from the airport and seeing her laying on floor with the children’s heads on her belly reading to them and inhaling the scent of fresh baked chocolate cookies when you came in the door. The best tonic for dealing with work related frustrations was coming home to a wife who was not worn out and haggard, giggling children, and a house filled with love.
So that's what love is? Ugh, I just threw up a little in my mouth. Soooo Mid century "Modern" Mr Bunny.

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Re: Affording stay at home parent

Post by chak » Sun Sep 15, 2013 2:27 pm

Thanks everyone for giving your perspectives and feedback. We need to process this information and make a decision that is right for our family. Right now, we are little overwhelmed. We need to balance both financials and intangibles in making this decision. As some of you called out, there is no right answer. It is important to live a life without regrets and plan for unexpected changes. Appreciate the input.

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Re: Affording stay at home parent

Post by White Coat Investor » Sun Sep 15, 2013 2:33 pm

I'm extremely supportive of having a stay at home parent, especially a mom. What's money for if it isn't to buy what you value, like time with your kids? We've never been in the 35% bracket either, but perhaps if she were working too and we quit contributing to 401Ks we could get there. Heck, I think everyone should work part-time, it's great! (My friends accuse me of being a part-time worker since my clinical hours average out to around 30-35 hours a week.)

All that said, I suggest some part-time work, whether volunteer or paid. I'd worry less about the retirement savings issue and more about retaining skills. My wife has been a stay at home mom since 2004. Professionally she's a teacher. Currently she's at the school 3-4 times a week volunteering with the PTA, teaching PE as a volunteer, and helping in classrooms. I don't think she'd have a bit of trouble moving into a teaching position. I have no idea how to do something similar with software development, perhaps as a part-time freelancer or something, dunno.
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Re: Affording stay at home parent

Post by TomatoTomahto » Sun Sep 15, 2013 4:59 pm

I know that you requested a chance to process, but I want to mention a few things:

First, I didn't read some of the comments in depth, but was put off by the sexist nature of much of it.
chak wrote:However, it will impact our overall savings with a reduction of 22%.
At the time that I decided to become a stay-at-home-Dad, our income was something like 60% wife, 40% husband. We were older than OP at the time of our decision. It turned out that, I think in part because my wife no longer had in the back of her mind a question about whether the children were well cared for, that her career flourished after I stayed at home. Her income is now considerably more than the sum of our incomes was before. Financially, we don't feel that we have lost any money, and in other ways, our children are thriving (not to say that they wouldn't have even with both of us at work, but it has worked well for all 4 of us this way).

Our circumstances were different because we were older, but for a younger person to stay at home, I think a post-nuptial agreement is a good idea, as is staying current with his or her skills. This says nothing about what your marriage is like, but is just based on statistics.

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Re: Affording stay at home parent

Post by scubadiver » Sun Sep 15, 2013 8:46 pm

My wife and I are similar in age and financial demographic though you do appear to be slightly better off income wise. My wife has been a SAHM for a five years now and honestly it has been the best decision we have ever made. To be sure, there were financial impacts, but I think we should be well positioned to retire by the time I'm 62 and put our kids through college with no debt in the process.

Does your spouse have a strong desire to stay at home? If so, I would go with it. In my opinion, when the family has a primary bread winner whose salary is stable and sufficient to afford a solid middle class lifestyle, the marginal benefit from a second lesser income is generally not worth hassle (day care, after school care, taking time off work to go to the pediatrician, etc) UNLESS that second lesser earning spouse is really passionate about his / her career.

This is really a challenge in optimizing your spouse's happiness.

Good luck,
Scubadiver

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Re: Affording stay at home parent

Post by HomerJ » Sun Sep 15, 2013 8:56 pm

the.fluffy.bunny wrote:I had many years of experience teaching children recreation classes and I could always tell on the first day of class which children came from single parent households, which children had a daddy in their life, those who came from two parent intact households, those children who went to private schools, those who attended public schools and those that were home schooled.
No, you couldn't.
And I can tell you as a man, working hard to provide, there was nothing like getting in from the airport and seeing her laying on floor with the children’s heads on her belly reading to them and inhaling the scent of fresh baked chocolate cookies when you came in the door.
I like never going to the airport and getting to read to my kids myself, same as my wife, and both of us making chocolate cookies together. But that's just me.

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Re: Affording stay at home parent

Post by jridger2011 » Sun Sep 15, 2013 10:15 pm

You mentioned your spouse being in software development so based on that, it would be very difficult to get back into work if she takes time off since that area moves fast. Even people working full time can feel outdated by a certain age which is a consideration as well. It would not make sense to work very hard when the kids are young only to get laid off by the time they are pre-teens and miss out on the time together. You'd have to ask her how much she enjoys the work, interaction with coworkers and a life outside of the house.

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Re: Affording stay at home parent

Post by travellight » Sun Sep 15, 2013 10:25 pm

I like the image of both of you making chocolate chip cookies together, Homerj!

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Re: Affording stay at home parent

Post by HomerJ » Sun Sep 15, 2013 11:27 pm

chak wrote:I am a long time forum reader and this is my first post. I appreciate any advice on how we should evaluate the decision of my spouse to be a stay-at-home parent. We are fortunate to have a high income with a marginal federal tax rate of 35%. My income is about 77% of it. Even without my spouse working for a salary, we will be able to afford a good living. However, it will impact our overall savings with a reduction of 22%. We like the option of stay-at-home parent until the our youngest kid goes to college, which is 14 years away. But, we are concerned about risks of single income and sufficient retirement savings. Since my spouse works as a software developer, it will be hard to get back into career after a long break. I am 39 years old and my spouse is 35 years. We have about $500K in investment accounts and $500K in home equity. Given the time to our retirement (20-25 years) and good income, we are inclined to make the decision for my spouse to be a stay-at-home parent. Do you think we are making the right decision for the family while managing the financial risks for a successful retirement? Thank you for your feedback in advance.
It would be useful to know how much you spend and save. Is $500k a rock-solid start to your retirement savings, or is just a first step? (i.e. do you think you will need $2 million or $10 million to retire?). Are you saving $30k a year or $150k?

As far as being a stay-at-home parent, I think it depends on the child and the parent and the life situation. My wife and I have three children. She stayed home for the first child from ages 3-8, and the second child from ages 0-2, and then discovered her husband had been cheating on her for a year, and ended up getting divorced with two small children to care for, and a long unemployment gap. Luckily her old boss took a chance on her, and hired her back. She was a single working parent for 2 years, and her children did just fine in day-care and after-school day-care. We met when the kids were 4 and 10 (married a year later), but there was no talk of either of us staying home with the kids since we both didn't make that much at the time, and I brought some student loan debt to the marriage.

Both girls did very well in day-care, and after school activities and we both were lucky enough to work for companies that let us leave early when we needed to. Both of our careers were starting to take off about 6 years after we got married, and my wife unexpectedly also got pregnant (Girls were 16 and 10 at time). There was no real thought of either of us staying home at the time. We had a 16 year who was headed off to college in 2 years, and a 10 year old who was an exceptional athlete playing 4 different sports with all the costs that entailed. Our son thrived in day-care, and our paychecks kept getting larger and larger. We were able to save a ton of money, put our daughters through college debt-free and take many amazing family trips.

When our son turned 9 two years ago, he did not do as well in after-school care (Before that he did very well; sometimes he'd get mad if I picked up him early because he wanted to stay to finish playing whatever game or activity they were doing). My wife's job had changed drastically, and she hated her new boss and the CEO (the CEO really was evil - I could tell you some stories). We took a long hard look at our finances and realized, she really just didn't have to work anymore.

So she quit her job a year ago, and has been a stay-at-home mom for a year (or as she calls it, retired). It's been good for our son. He needs her at home more than our daughters did. (But note he didn't need her at home at age 6 for instance - But now that he's in middle school, it IS good that she's there for him after school). My wife has mixed feelings. She misses work some, but also enjoys the time with our son and some free time for herself (she's been awfully busy though for someone who is not "working" - she's gotten a ton of projects done that we had put off for years).

In my limited experience, kids do very well in day-care until pre-teens. I think it's probably more useful to have a parent home from 10-14 than 5-8... But not all kids need you there. Both our daughters did very well from 10-14 with two working parents. And there's really no reason to be a stay-at-home parent when the kids are 16+. Unless the parent is basically retired like my wife is. (But I bet she gets bored when he's older and doesn't need her as much - I can see her doing part-time work or part-time volunteering).

Hope my experiences helped a little. Every child and every family is different.

It's a trade-off between money and time. Extra money is not just for retirement. It can mean taking the kids to Washington D.C. and being able to let your kid go to that summer camp that opens their eyes to something new. But time with the kids is important too.. For BOTH parents. If the working parent has to work 60 hours a week, and travel a lot so the other parent can stay home, then I don't think that's always the best solution. Two working parents that both are home at 5-6 is probably a better deal for the kids.

Remember, this whole stay-at-home and raise the kids thing is pretty new... Up until the mid 1900s, there was none of that nonsense. The mother worked all day, in the house and on the farm. She was BUSY. And the kids worked too... There was no staying home to focus solely on your kids until fairly recently.

You have to decide what's best for you... I think financially you'll be fine (again it would be good to know the numbers and how expensive your lifestyle is). Maybe (after the first year) see if your spouse can get part-time software development work when the kid is at school. No reason to let those skills completely go to waste.

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Re: Affording stay at home parent

Post by the.fluffy.bunny » Mon Sep 16, 2013 12:31 am

[OT comments removed by admin LadyGeek]

When we married we were both 30ish, we both married for the purpose of culminating an expression of love for one another through procreation. We also both committed to making whatever personal sacrifices it took to raise our children to the best of our ability. For us, that translated to a stay at home mommie and father as financial provider. We never denigrated others for the choices they made, but since both of us had roughly a decade of teaching experience at the time of our union we did have agreement on what we felt was the ideal situation for raising healthy, well adjusted, productive members of society. Since we made that decision, neither of us has seen evidence that altered our original perceptions.

To the OP my comments remain the same. Only you know what is in your heart, only you know how important family is to you and your wife, the love you feel for one another, and how you feel about bringing life into this world and what duties and obligations you assign to such a momentous decision. To thy own heart be true. But one thing to think about, I have yet to hear of any woman on her death bed utter – “I only wish I spent less time with my family and children”.
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Re: Affording stay at home parent

Post by TomatoTomahto » Mon Sep 16, 2013 5:40 am

HomerJ wrote:I think it's probably more useful to have a parent home from 10-14 than 5-8...
This.

I'd say that you can be very useful at 15 and 16 also. We have some very useful conversations in the car and while dinner is being prepared. Middle school is pretty tough on kids, and high school can be also.
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Re: Affording stay at home parent

Post by HomerJ » Mon Sep 16, 2013 7:40 am

the.fluffy.bunny wrote:For us, that translated to a stay at home mommie and father as financial provider.
Interesting choice of words.
But one thing to think about, I have yet to hear of any woman on her death bed utter – “I only wish I spent less time with my family and children”.
Never heard a man say that either. Too bad you had to work harder than the average man and travel a lot in order to provide for your family. A perfectly legitimate choice, and a noble sacrifice, but you were in their lives less, and your kids had less time with a father as a result. There's trade-offs in everything. But it sounds like your kids turned out great, so you made the correct choice for your family.

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Re: Affording stay at home parent

Post by HomerJ » Mon Sep 16, 2013 7:45 am

TomatoTomahto wrote:
HomerJ wrote:I think it's probably more useful to have a parent home from 10-14 than 5-8...
This.

I'd say that you can be very useful at 15 and 16 also. We have some very useful conversations in the car and while dinner is being prepared. Middle school is pretty tough on kids, and high school can be also.
Yes, I agree... My oldest daughter was huge in theatre, and had many friends, and activities for after-school... My middle daughter was an athlete and had many friends from her sports teams and activities after school.

My son is a computer geek (I lot like I was). He plays a little basketball (he's quite tall for his age - he was wearing men's 11 shoes at age 10), but he's more introverted, and has less friends... So far, middle school is going well, but I'm very glad my wife is able to stay home with him. It was good we did so well the last 10 years, and lived well below our means, so that we now have the luxury of a stay-at-home parent with no real financial sacrifice.

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Re: Affording stay at home parent

Post by 3CT_Paddler » Mon Sep 16, 2013 7:53 am

Just wanted to add another data point.

We are still new at this (16 month old with one on the way), but right now my spouse works part time (10 hrs a week) and I work full time. She may drop the part time work for a little while once the second one comes along. I think for many moms or stay at home parents, they need to find an outlet that is not 24/7 parenting. That could be work (part or full time), or it could be involvement in an organization you are passionate about... adult interaction is important.

While we would probably have more money if my wife had continued working, when you add in daycare costs, higher food costs (more eating out - little time to prepare food), and other extras like higher fuel and clothes costs, the take home hourly wage was a poor tradeoff. She is fortunate that her part time work can be mostly done at home. The downside is that she does lose out on career growth and development... which is why its a personal choice that must be agreed upon by both spouses.

In the OP's case, it seems to me like software development is an optimal career to have, if the biggest worry is becoming unemployable after years out of the workforce. They could conceivably keep their skills current by spending 5-10 hours a week on a work related open source project. That way if/when your spouse is ready to transition back, they have something on their resume to show that they still have relevant skills and are still involved in their field. But because these types of projects are usually not paid, the pressure and expectations are lower, and it would give them a lot of flexibility/options.

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Re: Affording stay at home parent

Post by frugaltype » Mon Sep 16, 2013 8:29 am

HomerJ wrote:
the.fluffy.bunny wrote:For us, that translated to a stay at home mommie and father as financial provider.
Interesting choice of words.
Yes, note how the female is infantilized.

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Re: Affording stay at home parent

Post by sls239 » Mon Sep 16, 2013 9:22 am

Financially speaking, I don't think anyone can say that having a stay-at-home parent is no sacrifice.

I think it can seem that way if the choice to have a SAHP is made before any commitment to a particular level of spending is made.

My advice is to be honest with yourselves. You can still be good parents if both are working. And you can still be in good financial shape if you have a SAHP.

I will say that child studies have shown that having a stable loving relationship with a 3rd adult is beneficial. Child welfare doesn't begin and end with just the "mommie" or even the "daddy." And one reason we have a SAHP is to make it easier to visit family members and help maintain those very special relationships.

Then again, many children bond strongly to a nanny or other primary caregiver as well as long as the relationship is stable.

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Re: Affording stay at home parent

Post by TomatoTomahto » Mon Sep 16, 2013 10:32 am

sls239 wrote:Financially speaking, I don't think anyone can say that having a stay-at-home parent is no sacrifice.
I have to respectfully disagree, at least in the limited sample of my family. My wife's income today is almost double what our combined income was when I began staying home with the children.
At the risk of being sexist/gender-specific, in my limited but observant life I have met many mothers who were held back because of "guilty" feelings about working outside the home; I have yet to meet a single father who felt that way. I am not saying that this is rational or right, but it is what I've observed.

My wife's career would probably have continued to improve, even if I were not staying at home. However, and mind you this isn't so obvious when you're in the middle of it and you notice the set-backs more than forward progress, if we drop back a few feet and get the wider view, she has soared since she didn''t have to feel ambivalent. And, in something that I hope won't be a problem by the time my children are having families, this was in spite of her being in an industry (large financial industry IT and software development management) that is anything but fair to women.

As I say, small sample size, but we are much better off financially in spite of having one income now. FWIW, that is even without taking into account any child-care costs.

EDITED TO ADD: I just noticed that it might be interpreted that my solution to a mother's guilty feelings is to have her stay at home. That is most definitely not what I meant to imply. In our case, my staying home got rid of my wife's guilty feelings :D

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Re: Affording stay at home parent

Post by Jeanz » Mon Sep 16, 2013 1:21 pm

At the risk of being sexist/gender-specific, in my limited but observant life I have met many mothers who were held back because of "guilty" feelings about working outside the home; I have yet to meet a single father who felt that way.
I have certainly met men who were torn between a desire for career advancement and a wish to spend more time with the family, or who were reluctant to move to a new city because the family would be uprooted. For myself, I sometimes felt guilty about missing time at work for family reasons, but then a talented young guy unfortunately had a terrible accident on his motorcycle. We were all sorry about it, of course, but it did make me reflect on the vulnerability of all human beings to illness or accident. In my experience working mothers were at least as reliable and as productive as other software developers. I think more so, but then I'm biased.

In response to some earlier posters, we did not find that my return to work interfered with family affection or with the stability of our marriage. On the contrary; I know a number of stay-at-home mothers who eventually went through a divorce.

Our children did very well in school and are leading happy productive adult lives.

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Re: Affording stay at home parent

Post by TomatoTomahto » Mon Sep 16, 2013 1:43 pm

Jeanz, to some extent I don't disagree; I was "torn between a desire for career advancement and a wish to spend more time with the family," but I never felt as though I should feel guilty for working.

Jeanz
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Re: Affording stay at home parent

Post by Jeanz » Mon Sep 16, 2013 2:44 pm

TomatoTomahto wrote:Jeanz, to some extent I don't disagree; I was "torn between a desire for career advancement and a wish to spend more time with the family," but I never felt as though I should feel guilty for working.
What I usually say from my elevated perch as grandmother is "All mothers feel guilty, whether they work or not". If your wife doesn't, I could change it to "Most", or leave it as hyperbole.

You make an excellent point, though, which is that it's important that parents be able to trust anyone who is looking after their children. It speaks well for both of you that you are able to make a somewhat unusual arrangement that meets your needs. I hope you're thinking about your own future, just as I would hope a woman in a similar position would do.

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