“How can it be a small career to tell one’s own children about the universe?” GK Chesterton
It’s a common misperception that the breadwinner in a family is the person who needs life cover, disability protection and severe illness cover.
“According to our financial planning principles, we believe in preparing a joint financial plan for both spouses – irrespective of who works, who doesn’t or how much each earns”, said Craig Torr, director at Crue Invest.
“Regardless of income, qualification or career, the couple is running a joint household and is jointly responsible for the financial future of the family.”
Torr added that the assumption is that there’s no risk that needs to be protected for the non-working partner because he or she doesn’t earn an income, does not contribute financially to the family bank account and if they were to die or become disabled there’d be no financial loss.
“This assumption is fundamentally flawed.”
A family of four, where the wife is the sole breadwinner and (by mutual agreement) the husband is a stay-at-home father to their two small children. The natural and correct assumption is that the wife would require insurance of some sort in the event of his death or disability. If she was to die, she would need to leave her husband with sufficient life cover so that he could maintain their lifestyle, invest for the children’s education and fund for his retirement. If she was to become disabled, she would need insurance to protect her income – in other words, to pay her a monthly disability income until retirement age. She’d probably also require a lump sum severe illness cover to provide capital in case she were to suffer from a debilitating illness. However, many couples fail to ask the question: what would happen to the working partner and children if something happened to the other working partner, in this case, the wife?
A common assumption is that there would be little financial implications in the event of the stay-at-home dad’s death. The reality, however, is that there’s a whole host of functions that would need to be replaced. Let’s look at the stay-at-home parent’s job description:
- Performing household chores
- Grocery shopping
- Clothing the children
- Paying and organising domestic workers
- Lifting children to sports and extra-murals
- Liaising with school and teachers
- Supervising homework and projects
- Preparing meals and school lunches
- Running the household budget
- Taking care of speech therapy, OT, doctors and other medical needs
- Attending school meetings, PPTs and other committees
The reality is that a full-time father might not earn an income, but he does work. His role as father is the most important job on earth. Some of the questions we’d encourage his wife to consider would be:
- Would your employer-granted compassionate leave be sufficient for you? Or would you need to take an extended sabbatical from work in order to deal with your grief and that of your children? If you’d like to take an extended period of leave (perhaps between 3 to 6 months), you’d need to provide for this in his life cover.
- Would your medical aid cover the costs of trauma/grief counselling for you and your children?If not, rather insure for these additional costs appropriately. In general, only comprehensive medical aids provide for psychology benefits subject to certain annual limits.
- Would you need to hire an au pair or a child-minder to take care of the children during the afternoons? By calculating the cost of a child-minder’s income and the years of schooling left, you can fairly easily calculate how much to insure for in this respect.
- Would you need to hire a tutor to assist your children with homework supervision?This will become more necessary as your children get older and their schoolwork becomes more challenging.
- What do you anticipate would be your baby-sitting expenses?You would need to consider the fact that if you travel regularly for business, you may need to hire a regular baby-sitter or live-in helper. Once again, these costs can be easily estimated.
- What would happen during school holidays?You will need to consider holiday care. Alternatively, you may need to consider the costs of flying grandparents down for the holiday periods to help look after the grandchildren.
- Would you need to hire a domestic worker (or increase domestic help) to include meal preparation for the family? If you’re working full-time, you will need someone to prepare meals for you and the children, pack school lunches and attend to their nutritional needs.
- Would you consider cutting back on your hours of work in order to spend more time with the children? In this regard, you can calculate your potential loss of income over a period of time (for instance, until the children are in high school) and then insure for the future income loss.
- Would you consider having your parents (or perhaps your in-laws) move in with you to assist with the children?If so, would you need to rennovate the house or make structural changes to accommodate them.
“Our society, in general, undervalues the role of the stay-at-home-parent and this is never more evident that in the field of financial planning. In the words of GK Chesterton, “How can it be a small career to tell one’s own children about the universe? How can it be broad to be the same thing to everyone and narrow to be everything to someone? No, a woman’s function is laborious, but because it is gigantic, not because it is minute”, said Torr.
The mistake made by so many financial planners is they assume that if there’s no financial loss, there’s nothing worth protecting. The reality is the loss of a stay at home parent is greater than anyone can ever quantify, and the loved ones left behind are well worth protecting.