Financial planning for a stay-at-home spouse
Written by Verena Malherbe on June 06, 2019.
I recently came across an article by Melinda Gates on Linkedin which stopped me in my tracks. It was this quote, from economist Marilyn Waring, which particularly resonated with me: ‘If you hired workers at the market rate to do all the unpaid work women do, unpaid work would be the biggest sector of the global economy.’
Most of the unpaid work women do – and yes, some men too, although studies show that it is still largely women – involves running a household and caring for families, whether that be children or elderly parents or, increasingly for the so-called ‘sandwich generation’, both. Being a stay-at-home carer requires the ability to multitask 24/7 and to employ a vast range of skills taking on the roles of chef, accountant, nanny, chauffeur, personal shopper, cleaner, nurse and more.
Now imagine what would happen if the unthinkable happened and the person who carries out all those tasks in your household became gravely ill, or worse? How much would it cost to pay someone to do everything that they do from looking after pre-school babies or toddlers all day long to cooking two or three meals a day, from keeping the fridge stocked and the house clean and tidy to ferrying kids to school and activities or taking them to the doctor when they are unwell? If that’s starting to make you panic, there is a way to protect your family and it is with life insurance.
Most families tend to focus on the primary breadwinner when they take out life insurance because it’s pretty easy to comprehend how catastrophic having no income would be on a household. However, people tend to overlook the huge non-financial contribution of a stay-at-home parent because, as Melinda Gates points out, unpaid work has traditionally been undervalued and not even recognised as work. Nevertheless, when you consider how much it would cost to pay someone – or more likely multiple people – to do that work, you start to see just how devastating the financial impact of losing that person could be. Which is why life insurance for stay-at-home partners is a vitally important part of a sound financial plan.
It’s also imperative to consider the long term financial planning requirements of a stay-at-home partner who may have no formal pension provision. Care needs to be taken to ensure that both partners can enjoy a secure retirement, whatever happens in the future. It could be that the working partner invests into a retirement fund for the stay-at-home spouse so that they have independent income in their latter years. Life insurance can also play a part in retirement planning to provide tax-free cash flow. This is a complicated area so I strongly advise both parties sitting down with a financial adviser to discuss the options available to them.
Just because someone doesn’t get remunerated for their work doesn’t mean that they don’t need to be considered in a financial plan. If you think there are areas you need to address to protect all members of your household, working or otherwise, now is the time to discuss them with a financial adviser and take the necessary steps to plug any gaps. I'd be happy to help - drop me a line at firstname.lastname@example.org for an assessment of your family’s situation.