Financial planning for stay at home moms
As a Financial Advisor for young families my goal is to relieve the burden of managing finances, so they can live the life they want. As a female financial advisor, I want to empower all women when it comes to their finances, whether they work inside or outside of the home.
Stay at Home Moms are often overlooked by financial advisors because they do not earn a paycheck and have smaller assets compared to their spouses.
Striving to be different, and trying to serve all women, this is the third post in a blog series I have created called Financial Planning for Stay at Home Moms.
The first blog in this series is called: Retirement Planning for Stay at Home Moms, which talks about how SAHMs can plan and save for retirement. Post 2 in the series addresses what Stay at Home Moms should do with their old 401ks and roth conversion opportunities.
SAHM’s have no job description, their duties can change depending on what is best for their family that day, week or month. Or they have to adjust their duties based on whatever life is throwing at them daily. This results in feeling out of control of the situation they live in daily. Instead their day is determined by the individual tasks that are completed routinely.
What is a Stay at Home Mom’s Salary?
Quantifying the Daily Work of a SAHM
Many stay-at-home moms say that holding a full-time job is easier than running the household. Studies support this agreement, with the work of a SAHM being equivalent to 2.5 full-time jobs. Let’s look at a few of the daily tasks a SAHM completes and assign them a monetary value.
WHAT IS A STAY AT HOME MOM’S SALARY?
Looking at the Daily Work of a Stay at Home Mom: Schooling
The main reason why parents decide to stay at home with their young children is because of the cost of daycare.
Daycare is expensive and many people say “I’m working just to pay for daycare!” Although that is a bit of an exaggeration, they are not wrong when they say that a lot of their income goes to childcare.
The Demanding Change report by ChildCare Aware of America found that the national average annual cost of childcare in 2020 was $10,174.
$10,174 represents more than 10% of the median income for a married couple and more than 35% of the median income for a single parent.
This percentage that childcare represents is a major issue because the US Department of Health and Human Services recommends that parents spend no more than 7% of their household income on childcare. (Have I ever mentioned that I have twins in daycare? And their tuition is not buy one get one free…)
Daycare costs are also outpacing inflation by 3%. Meaning if inflation is 4% for the year, daycare costs will be about 7% higher the following year.
This major cost, not surprisingly, is resulting in thousands of parents, likely mothers, to leave the workforce and stay home with their children.
When a parent is home with their child(ren), they are keeping their child(ren) active with playgroups, teaching them age appropriate curriculum and playing with them.
According to the Labor Department, the median hourly wage for child day care services is $13.22.
If a stay-at-home mom were to earn an equivalent wage for child care, she would make $33.84 a day for an average of 2.56 hours spent providing care for her children, if the children were in full time school or $105.76 a day if her children were home with her from 9-5.
- Annual SAHM income for childcare: $8,460-$26,440 ($33.84 and $105.76 x 250 week days/year)
So, the first item to write down when deciding a SAHM’s salary is childcare costs. If there is more than one child, the number needs to be doubled or tripled.
Daily Work of a Stay at Home Mom: House Cleaning
Kids are messy! Your house might look pristine in the morning, but by lunchtime, or after the first snack of the morning, crumbs, fingerprints, messes… everywhere! This leads to the need for house cleaning on a daily or hourly) basis. It is not unrealistic to say that by mid-day, toys are scattered in every room, muddy footprints throughout the house, and whatever was tidy is no longer.
The national average for a house cleaner ranges from $45 – $50 an hour. Even if you spend just three hours a day picking up the house and wiping down the counters, you should be making $135 – $150 per day. Now multiply that by 250 week days, and you should be making at least a $33,000 salary from house cleaning alone. Wouldn’t that be nice?
Daily Work of a Stay at Home Mom: School Pick up and Drop off
Buses don’t cater to every neighborhood, the school buses in my district are very unpredictable. It is realistic that sometimes the morning bus doesn’t show up at all, which means we have to make the 15 minute drive to school, wait in the drop off line and go 15 minutes home, pushing back our day back by 45+ minutes. If both parents have an office job with meetings and phone calls and rush hour, these 45 minutes could devastate their day. When one parent stays at home, the inconvenience still exists but it doesn’t result in missed meetings or traffic jams.
Or maybe your child has a late start or only goes for a half day. Whatever the case, one of the top daily roles of a SAHM is school pick up and drop off. The miles add up. The IRS standard mileage rate is 58.5 cents per mile for gas and wear and tear on your vehicle.
For simplicity purposes, let’s say that the school is only 5 miles away, even though most schools are much farther. This means you are driving 20 miles a day (two 10 mile round trips a day) for about 180 days out of the year. The IRS says you should receive $2,106. And this does not include an hourly rate for waiting in line.
Daily Work of a Stay at Home Mom: Activity Hopping
Activity hopping can also be quantified. Running from soccer practice to ballet and back to soccer takes time! It’s not uncommon for SAHMs to juggle multiple activities each night, especially when numerous children are involved.
Also, many activities start at 5:30, so if both parents worked until 5, it would be pretty tight to get home, get kids ready for activities and out the door. By being a SAHM you allow your children to participate in activities they may not have been able to if you and your spouse worked full time.
Private transportation services charge around $25 – $30 per destination, yet a SAHM receives $0. Even with just two activities a day for 75% of the year, that equates to over $13,000, not including the standard mileage rate.
Daily Work of a Stay at Home Mom: Cooking
Another traditional duty of a SAHM is cooking. SAHMs cook multiple meals in a day with little ones still at home. As an aside, isn’t it inevitable that the one item your little one has been eating and enjoying for weeks can overnight be what they hate to eat the most?! What’s with that?
The median price of a personal chef in the U.S. that cooks five meals a week for a family of four is between $200 – $300, not including groceries.
Let’s say you cook at home 75% of the time. At 40 weeks out of the year and at $250 per week, you should be receiving $10,000. Now, if you factor in two meals a day, this number should be doubled to $20,000. Receiving $20,000 each year would make cooking a little more fun, wouldn’t it?
What is a Stay at Home Mom’s Salary?
It goes without saying that these couple of examples do not completely cover a SAHMs daily activities, but it’s at least a start. Using our estimates, this SAHM of one child should receive at least a $78,000 salary, for two kids, almost $90,000! We didn’t even start to talk about laundry, yard work, scheduling, grocery shopping, anything that would be outsourced if both parents worked outside the home.
Economists estimate that the value of a SAHM equates to a salary of $126,725. Certainly nothing to sneeze at! With a six-figure salary, do you now feel more comfortable getting your seat at your household’s financial table?
According to the Pew Research Center, roughly one in five U.S. adults are stay-at-home parents. With stay at home parenting so prevalent, it is important to provide resources to households with SAHPs.
Close to half of mothers whose husbands earn $250,000 or higher a year (46%) are not in the labor force. On the other end of the income spectrum, 35% of mothers whose husbands make less than $25,000 a year are stay-at-home moms.
SAHMs are one of the top assets a family has. This makes it important to pay you for your work, ensuring security and safety if the family dynamic changes or retirement rolls around. Consider the following “payment” methods for your work.
How to Pay a Mom for Her Work? – Spousal IRA
The first payment avenue is a Spousal Individual Retirement Account. This is a retirement account that a working spouse can set up and contribute to for the nonworking spouse.
It may seem silly to save for retirement for a person that doesn’t work outside the home. But, everyone retires one day.
Because you are not paying social security tax through a paycheck deduction, a SAHM is likely going to receive a spousal social security payment, which is 50% of their spouse’s social security payment (assuming you wait until Full Retirement Age), which is $830.29 a month. If you do not save for retirement, that is all the money you will have in retirement. Is $830.29 enough for you to live off of?
If your husband holds a full-time job and you stay at home, he can set up a Spousal IRA account and contribute up to $6,500 on your behalf in 2022. The account then continues to grow tax-free, setting you up for retirement. For more information on Spousal IRAs, check out our blog post.
How to Pay a Mom for Her Work? – Life Insurance
Another financial component to consider is life insurance. Stay-at-home moms actually need more life insurance than most people think.
If you were to pass away prematurely and your spouse still needed to work full-time, who would take on all of the daily duties? Odds are you would need to pay someone the average rates.
The mistake is often made to not have life insurance on the non-working spouse because there is no paycheck to replace. That thinking is incorrect, because we showed you how much the non-working spouse is actually providing to their household.
All of those duties don’t go away, so they will need to be paid for or provided.
If the working spouse’s income is not significantly larger than what the stay at home parent is providing, they won’t have enough money to survive if they have to outsource those duties.
Life insurance can help minimize the financial impact of shifting to outside help.
How to Pay a Mom for Her Work? – Outside Investment Accounts
Outside investment accounts in your name are another consideration to save into once you have leveraged the Spousal IRA. This is like a traditional brokerage account in your spouse’s name. Contributing even a small amount to outside investment accounts each month adds up over the course of ten or twenty years, providing added security and income during retirement.
What is a Stay at Home Mom’s Salary? Set Yourself up for Financial Success
Putting your daily duties as a SAHM into monetary terms helps a SAHM see the positive financial impact you have on your family. Instead of paying someone $88,000 a year to run the household, you take on these duties for free.
Setting yourself and your family up for future financial success relies on leveraging the different ways you can pay yourself a salary without seeing a direct deposited check every two weeks.
To understand the different avenues that might be right for your situation, reach out to Greenway Wealth Advisory today. We know that SAHMs are valuable to the family dynamic, which is why we prioritize finding ways to funnel your value into different financial avenues.
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