Financial rewards for stay-at-home dads this Father’s day
Father’s day on 18 June reminds us just how important dads are and with 262,000* now providing childcare and running the home, up from 110,000 in 1993, we think we need to show our appreciation of this growing group by safeguarding their financial wellbeing.
According to the Office of National Statistics, an extra 16,000 dads – some 308 a week - opted to stay-at-home; commentators suggest this role equates to a salary of £160,000 a year. But with three quarters of adults having no life cover**, we are concerned that parents are financially exposed.
If something happens to the main wage earner, for example, the childcare provider will be left reliant on meagre State hand-outs or support from relatives and friends. Similarly if something happens to the childcare provider, the wage earner will either have to pay for childcare or give up work.
For life cover payments, both partners need to work out how much they’d like their dependents to have. To do this multiply the salary by 10 (as a general rule), add outgoings, including debts and potential future costs, and then decide how long the cover should run for (factoring in any future family growth).
Choose between level term (for a fixed period, paying a set amount), whole of life (lasts as long as you do) and mortgage decreasing term cover (pays your mortgage if you die within the repayment period). The latter is the cheapest because it only pays what’s left on your mortgage (which may be low) and doesn’t give you a lump sum towards any other outgoings.
We also suspect very few home-based dads are replacing their lost employer pension contributions which in turn will impact on their retirement fund. With everyone financially stretched, it’s unlikely there’s anything left at the end of the month to build dad’s pension pot.
But if we divert some of those everyday ‘invisible spends’ - coffees, smoothies, bottled water, sandwiches, lunchtime, after-work snacks and take-aways – into a personal pension, it could make a huge difference.
Spending £2.50 per day, Monday to Friday, on a coffee alone will drain an average of £12.50 per week/£50 per month/£600 per year from the household budget.
Diverting £600 a year into a personal pension for dad results in a pot worth £720, courtesy of the Treasury (the pension provider claims this extra money - 20% tax relief - from HMRC). While this may not seem much, the pot will soon grow over time.
Dads who are not entitled to child benefit due to their partner’s earnings can still claim child benefit in their name; it will entitle them to credits toward the state pension. The child benefit awarded can then be recouped via their partner’s tax return.
Father’s day is a good time to discuss the growing number of dads who have swapped the office for childcare. It’s an equally good time to highlight the mechanisms they need to put in place, such as life cover, pensions and savings, to help build their future financial resilience.
Help is available
For parents without the time or inclination to sort out life cover, a pension or saving for future goals, we have online tools to help.