This post is presented by Financial Advisor, Michelle Levesque

Many couples choose for one parent to stay at home with the children if financially feasible.  It can be a bit tighter financially to have only one income coming into the home.  However, with the cost of day care, it can make sense as the high cost can eat up the majority of what one partner earns.  I often see the cost of day care for two children being more than a family’s mortgage payment. Add onto that the cost of gas, work attire, two reliable vehicles, and it can make financial sense for one partner to stay at home.

Another thing to consider is government funding.  Your Canada Child Benefit funding received monthly is calculated based on your after tax yearly total family income.  If two are earning, that decreases the amount of funding the government will give you…again making the choice to have one parent stay at home make sense.

When you and your partner make the decision for one of you to be a stay at home parent, the tendency is to center all the financial decisions on the person who is still earning an income. I see it every day…the stay at home parent saying they don’t make financial decisions because they are not earning the money.  Being a stay at home parent is probably the hardest, most important work there is.  Do not underestimate the value you bring to your family being a stay at home parent.

If your family makes the choice to have one parent stay at home there are a few financial steps you need to take:

1. Purchase Life Insurance for the Stay at Home Parent

 Families often do not have any insurance for the at home parent.  They assume they only need to cover the parent bringing income into the home to replace that lost income if they were to pass.  If you have young kids that is a big mistake. If the stay at home parent were to pass, how would the other parent care for the children?  You would need to pay for daycare, perhaps cut back on work hours to ensure you are home to make meals in the evening, go to work later if you need to be home to get the children on the bus…all that costs money.

2. Fund a Spousal RRSP for the Stay At Home Parent

Save money for retirement and get a huge tax break before and during retirement!  One of the issues with an RRSP owned by the working spouse is if that person is earning a good income they will get a good tax break when they contribute to an RRSP, but at retirement if they have planned well, have a pension, personally owned RRSPs, Canada Pension Plan….then they may still be taxed heavily during retirement. 

If you elect to open a Spousal RRSP instead, this can really offset the tax liability during retirement.  With a Spousal account the higher earning spouse contributes, thereby getting the higher initial tax deduction.  But then during retirement when the funds are withdrawn for income, it is taken out at the lower income earning spouse’s tax rate so a lot less tax is owed!

3. Work Together on Long-Term Planning

Most often I see households where the wife is the spouse that stays at home.  Often she handles the monthly bill paying, and the husband is in charge of the investing and planning decisions. Because of this arrangement many women end up being a bit clueless about major financial decisions that will impact their life. From how much is being saved for retirement, how that money is being invested, to whether there is sufficient life insurance. You both must be actively involved in monthly budgeting and planning decisions.

You should also attend meetings with your Financial Advisor together and don’t be afraid to ask questions.  Whenever a client tells me they have a stupid question, I always tell them there is no such thing.  This is my area of expertise.  This is why you are coming to me for advice.  I do not presume to know anything about your line of work and you should not feel like you have to know everything about mine.

Questions?  Find me on Facebook!  Until next time! 

 

 

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I have been guiding individuals and business owners financially since 2008.  I chose to represent Front Gate Financial Group, a local brokerage, which offers every bank and insurance company.  I do not believe in being biased or product pushing for one particular company since all companies can have competitive products at any given time.  I review each individual’s entire financial circumstance, educate, then shop the market for the best in all areas. You deal with one person you trust and know you have the best in all areas. 

My favourite part of being a Financial Advisor is educating and empowering people financially.  There’s nothing better than having a new client tell me they are no longer overwhelmed and confused by their finances and are excited by the game plan we have put in place to budget, pay down debts, protect their family, and reach their goal of retiring comfortably. 

Over the years I have been asked to give financial education presentations at numerous groups and events including:  Fredericton Area Women’s Business Network, International Women’s Day, Mom Talk NB, the Oromocto Chamber of Commerce, Fredericton Regional Family Resource Centre, Military Family Resource Centre, Wedding Shows, Facebook groups. I am currently the Financial Pro for Mom Talk NB providing monthly articles and live discussions.

I am married, have a little fur baby AND… recently welcomed our daughter to the world!  I enjoy travelling with my family, painting, scuba diving, snowboarding, yoga, and walking my pup. Quality time with family and friends is everything!

Find me on Facebook!

 

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