How Can I Save for Retirement as a SAHM? And Other Pressing Finance Questions
From school tuition to braces to family vacations, stay-at-home mothers are used to saving and planning for everyone else. But experts say there’s plenty moms should do to financially protect themselves, too.
Whether you’re part of the paid workforce or work as a stay-at-home mom, every mother should feel empowered to make financial decisions for herself and her family. But finding your financial footing while in a career pause is easier said than done.
In fact, a recent report from Mother Untitled revealed that finances are the top source of strain for stay-at-home mothers. The American Mothers on Pause survey, which polled 1,200 mothers in full-time stay-at-home motherhood, in downshifted careers, and actively contemplating a career pause, showed that 44 percent of stay-at-home moms and moms in career downshifts worry about money as a result of their decision. The percentage is even higher among women who worked for more than 10 years before pausing; 54 percent of women in that scenario report feeling stressed over their finances.
To help at-home parents feel more secure, we tapped financial experts to talk all things money, as it relates to career pauses and family life. Below, these experts guide us on which financial concerns should take priority during a career break—and how best to go about tackling them.
Meet the Experts
Cindy Hounsell: Founder and president of the Women’s Institute for a Secure Retirement, a non-profit financial advocacy group in Washington, D.C.
Sujhey C. Beisser: Vice president of strategy & development at Park Bank in Madison, Wisconsin.
Ann Kienast: Certified retirement counselor at Old National Investments in Madison, Wisconsin.
Daniel Weiss: Co-founder of LBW Wealth Management.
What is the First Step to Getting Financially Organized as a SAHM?
Aside from understanding your family’s finances–such as income, bills, and investments—establishing an emergency fund is a crucial step to finding your financial footing, says Cindy Hounsell, the president of the Women’s Institute for a Secure Retirement, a non-profit financial advocacy group in Washington, D.C.
“Every research study shows that women [in partnerships] pay the bills,” Hounsell says. “But do they know where the money’s invested, or how to access it in the event they need funds right away?”
Hounsell recommends prioritizing your emergency fund above all else, accruing what you can in a high yield savings account, which is an online savings option that typically offers the highest interest rates. Once you have a good handle on your family’s cash flow, you’ll want to squirrel away at least three months worth of expenses in the event of job loss, medical emergencies, or other unforeseen circumstances, Hounsell adds.
Every research study shows that women [in partnerships] pay the bills. But do they know where the money’s invested, or how to access it in the event they need funds right away?
Should I Be Concerned About My Credit Score as a Stay-at-Home Mother?
Building and maintaining a strong credit score should never be on the back burner—even during periods in which you’re not earning a regular paycheck, says Sujhey C. Beisser, vice president of strategy & development at Park Bank in Madison, Wisconsin.
“Income is not a credit score factor. The score is reflective of the status of your mortgage, car loans, student loans, credit cards, and other lines of credit. If you can make payments to all your obligations on time, you should not be concerned about your credit score,” Beisser says. The key, she explains, is to make payments on time, noting it doesn’t matter where your payments come from, like say a savings account or a partner’s income.
Similarly, for those who did not build credit before starting a family–or have credit they need to repair–Ann Kienast, a certified retirement counselor at Old National Investments in Madison, Wisconsin, advises signing up for a low-limit credit card, or a secured credit card, which typically requires a down payment equal to your credit limit. Keep your balance low, Kienast advises, using no more than 30 percent of your limit, and pay your bill religiously.
How Can I Save for Retirement as a Stay-at-Home Mom?
According to data from the U.S. Census Bureau, 50 percent of women in their early retirement years have no retirement savings¹, a bleak statistic that may be attributed in part to women’s lower lifetime earnings. What’s more, women tend to live longer than men, making a robust retirement account all the more necessary.² But without careful planning, mothers who leave the workforce to help raise their families may be at a disadvantage, as they miss out on potential employee benefits, such as retirement savings accounts, Hounsell notes.
That’s precisely where a spousal individual retirement account (IRA) comes in, she says. For stay-at-home mothers who do not earn their own income, a spousal IRA allows an employed spouse to contribute to their partner’s retirement funds, helping to level the playing field for mothers who don’t earn a steady income.
“The non-earning spouse benefits by having assets that are entirely in their own name,” Hounsell says, noting that this is crucial in the event of divorce. “This means that once a contribution is made to that IRA, it belongs entirely to the person who owns it, and not the person who made the contribution.”
Your ultimate savings goal should be 15 percent of your income to ensure you have enough saved to account for inflation, Hounsell says. But if 15 percent isn’t tenable, start with 5 percent and work your way up incrementally, she adds.
To get started with a spousal IRA, which is simply a traditional or Roth IRA held in a non-earning spouse’s name, contact a trusted financial advisor–or work with an online IRA broker.
What’s the Best Way to Handle Discretionary Spending When One Partner’s Labor is Unpaid?
“Even if you are not contributing with a paycheck, there are other contributions you are making to your family that are valuable and saving money,” Beisser says. She recommends sitting down with your partner for an honest conversation about budgeting. “I recommend creating a separate account for discretionary funds, then having a fraction of the budget be allocated to it every month. That way, there is more flexibility for you, plus no question on how the funds are spent if there is an agreement from both parties at the beginning.”
Discretionary spending accounts can be a reward for both partners and the incredibly valuable work you both do for your family.
Adding to that, Daniel Weiss, co-founder of LBW Wealth Management, underscores the importance of being involved in your household finances—with or without an income of your own. He suggests getting a firm handle on your family’s cash flow, expenses, and financial goals. With some smart planning, Weiss says that discretionary spending accounts can be a reward for both partners and the incredibly valuable work you both do for your family.
Do I Need Life Insurance as a Stay-at-Home Mom?
Another conundrum for couples who are currently relying on one income is how current finances should inform their decisions about life insurance. Of course, it’s a topic that may be tough to broach, but Kienast encourages parents to consider how their families might cope without their contributions, should something catastrophic occur.
It turns out that the most practical solution is pretty straight-forward: Even stay-at-home mothers should consider taking out a life insurance policy. “Despite not having solo income as a SAHM, your contributions may still need to be replaced in some capacity,” Kienast explains. “This might take the form of daycare costs or college funds for older children.”
If you don’t know where to start, make an appointment with a financial planner who can help you understand your coverage options. You may be uncomfortable planning for a catastrophic event, but as Weiss says, setting up a life insurance policy is about protecting the valuable contributions you make to your family—and ensuring they’re cared for in your absence.
References:
Women More Likely Than Men to Have No Retirement Savings. United States Census Bureau. Accessed 9/8/2023.
How Does Gender Equality Affect Women in Retirement? Brookings Institute. Accessed 9/7/2023.
