The Sad Economic Truth

matthew's picture

In my inbox this morning, I ran across an article relating the sad economic truth regarding stay-at-home parents in What's a Homemaker Worth? The Shocking Truth." on MSN.com.

The email chain says a homemaker is worth $500,000 a year.

The actuarial tables say $30,000.

Now, I agree that having a wife and mother stay at home with the children is wonderful. The kids get more love and more treats, more hugs and more kisses, and who can deny the value of raising great kids with a parent at home rather than out in the workplace? But those values are personal and intangible... not financial.

But the article ended with some helpful hints that, despite the gloomy reality of the financial value of a stay-at-home parent, there are a few options to mitigate it:

Go forth and get your ducks in order
You should understand just what youre giving up, though, in order to make a rational decision about whether to stay at home and for how long. You also should do what you can to make sure your finances, both short- and long-term, remain sound:

# Disaster-proof your finances. Pay off debt, contribute as much as possible to retirement funds and keep a hefty emergency fund. Single-income families typically should have at least six months living expenses in a safe, liquid account.

# Get insured. You almost certainly wont be able to buy disability insurance for a stay-at-home spouse, but you should be able to get life insurance coverage -- and if you have children, you almost certainly need some. The younger your children are, says former insurance agent Catherine Gretta, corporate vice president for New York Life Insurance, the more insurance you need to cover their care. To determine how much insurance you should have, you can talk to an agent or use MSN Moneys Life Insurance Needs Estimator; increase the estimate of your current living expenses by the amount your family would need to pay for child care and housekeeping services.

# Make sure you have retirement savings in your own name. Your spouse can contribute up to $3,000 a year to an Individual Retirement Account for you. (You also can claim half your spouses Social Security benefit if youre married for at least 10 years, and may be able claim a portion of his or her workplace retirement plans as well.)

# Consider working at least part-time once your children reach school age. You may lose much of your wages to the costs of working -- taxes, child care, commuting costs. (For more views on this subject, read " Second incomes: twice the work, half the return," and "Cost of being a stay-at-home mom: $1 million," on MSN Money. And try MSN Money's Second Income Calculator. ) Those losses, however, could be offset by other benefits, such as keeping your job skills current and being able to contribute to a retirement fund or earn pension credits.