Question:
I just had my first child, and I am considering quitting my job. We’ve crunched the numbers, and we should be able to get by on my husband’s salary alone. What other financial considerations should I take into account?
Answer:
The first thing we suggest is to have your emergency reserves in place. Emergency reserves are to cover basic living expenses and allow you to weather the loss of your husband’s job and any medical bills. We suggest at least six-month’s worth of expenses, but in this economy we suggest being more conservative and consider eight month’s to a year’s worth of expenses. You have to consider how quickly your husband could become employed and how good your disability insurance coverage is. Also consider how quickly you could get your old job or an equivalent back.
You also have to consider life insurance and disability insurance for both spouses—especially you as the stay-at-home mother as you are performing an economic job. The reality is if you were not staying at home, you would have to pay someone else to stay with the child.
Some recent figures show that it costs an average of $270,000 to raise a child. In some more affluent areas of the country, it can be upwards of $450,000. We are fortunate to live in the Southeast where it is significantly less than if you were in the Northeast or West.
Our last piece of advice would be to roll over your 401(k) to an IRA. You and your husband will need to continue to save by putting $5,000 a year away in a Roth or Traditional IRA. Additionally, your husband should be maxing out his 401(k) at work.