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Insure a Stay-at-home Parent

In many Canadian families one parent will opt to stay home to look after the children, usually when the children are under age two or there is more than one child. It's often a financial trade-off for young couples – whether to spend money on daycare or struggle along on one income.

A life transition
This is one of life's transitions and a good time to get some financial advice from a member of Advocis. There are several long-term financial repercussions to consider.

The first concern is whether the family can survive on one income - some financial advice may help you change your lifestyle to live within a restricted budget. Remember that couples with a single income are taxed more heavily than those who split their income. See Taxing Canadian Twosomes. The parent who quits a job to stay with young children loses RRSP contribution room for the time he or she is out of the workforce. That can be addressed using spousal RRSP contributions. See RRSP Consumer Tips.

What about life insurance?
A parent who leaves a salaried job with benefits often loses life insurance coverage. So couples are left with the decision - should we insure a stay-at-home Mom or Dad?

Stop and consider the value of what Mom contributes to your family when she is at home. She may not be generating an income, but she sure is saving you both a bundle in daycare costs, housekeeping costs and peace of mind. If your wife died, it could cost $30,000 or more a year to hire a nanny or replace what she does with daycare and a housekeeper.

A stay-at-home Dad also saves you money on shopping around for clothes and food, Dad's taxi service to hockey and ballet lessons and home-cooked meals. He provides the opportunity for his working partner to get on with the job, as someone is there to help with homework or care for sick children.

Insurance you can afford
Young families on one income are often stretched for cash, but life insurance is not a frill. It may be possible to carry on a group policy from a former employer or to find insurance that meets your budget. Sit down with any member of Advocis and try to find a policy you can afford. Advocis members with a life insurance licence can show you how a combination of mortgage insurance and term insurance can protect your family if one of you dies. See also How to save for a child.

“You cannot avoid risk, but you can manage it.”