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Stay-At-Home Parent? Good for You, but Watch Financial Consequences

Brian O'Connell

NEW YORK (TheStreet) — Being a stay-at-home parents has its advantages.

You won't miss your child's first words, steps or learning experiences on a playground, park or just walking around the block.

The number of stay-at-home mothers is on the rise, with 29% opting to remain in the homestead in 2012, up from 23% in 1999. Stay-at-home dads account for 16% of stay-at-homes parents through 2012, up from 10% in 1989.

But there are financial factors that come into play that any parent should know about before deciding to be at home with the kids. The Washington, D.C.-based Certified Financial Planning Board says they are "under the radar" costs that are all too real and need to be addressed.

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"The total cost of leaving a job to become a stay-at-home parent isn't simply a tally of hard costs paid for by check or credit card, like the costs of professional attire or a subway pass," says Eleanor Blayney, a consumer advocate for the CFPB. "Many people don't consider the foregone benefits, which are easy to ignore when making this decision because they are hard to quantify."

There are some net financial positives in electing to stay-at-home parent, Blayney adds. Costs attached to day care (which can run up to $285 per week for an infant, according to the YMCA), telecommuting and pricey lunches out of the home all add up. Throw in dry cleaning and the odd happy hour or night out with co-workers and there are some significant savings.

But that's where the benefits end and the negatives begin, the CFP says. They include:

Retirement savings. When you're not working, you're not contributing to your long-term retirement savings. While you can still contribute to an Individual Retirement Account, the asset volumes will be much lower than with a traditional employer-sponsored retirement plan.

Social Security. Again, not being in the workforce also reduces your Social Security fund. "Retirement benefits are calculated on the highest-paid 35 years of employment, and no credit is given to full-time parents," Blayney says. "Time out of the workplace can mean receiving lower Social Security benefits."

Insurance costs. When you leave the workforce, you may also be leaving some good insurance benefits behind. Losing employer-funded health insurance, in particular, can affect the bottom line, Blayney says.

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Losing some of your "hireability." Too many years away from the workforce can make you less attractive to future employers. "A prolonged departure from the workplace makes rejoining the workforce at a later date harder, especially at an income or responsibility level comparable to that of a previous job," Blayney says. "The amount of foregone future income and employment benefits can be considerable."

Of course, the biggest financial factor may be loss of income from not having a salary anymore. That will really hit home once you decide to stay home, even for a year or so.

Blayney says she is not trying to talk anyone in or out of being a stay-at-home parent. All she's saying is to know the financial ramifications of leaving the workforce to stay at home with a child or children.

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