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Financial considerations for stay-at-home parents

Committed relationships involve more than just excitement and romance. When two people share living expenses, property and/or children, it’s important to ensure that both partners are financially protected if the relationship deteriorates.

In relationships where one person stays home and the other is the sole breadwinner, there are unique considerations to be aware of when planning your financial future. 

Encouraging women to become a stay-at-home girlfriend has become popular on TikTok, raising concerns with financial experts because many do not understand the long-term financial impact of choosing not to work. 

Before deciding to become a stay-at-home parent or stay-at-home partner, here are some things to consider. 

 

What is the difference between common-law relationships and marriage?

This is a common question asked by new couples beginning the adventure of cohabitation. 

Marriage is when two individuals enter into a legal contract with the intent of committing to one another for life. Unfortunately, the reality is that nearly 38% of Canadian marriages end in divorce. 

Common-law marriage is when two people who are not legally married live together in a conjugal relationship for over 12 months. 

In both types of relationships, two people are pooling resources to cover the cost of renting or owning a home, saving for the future, and possibly raising children. If the relationship dissolves, the financial implications can get complicated. This is especially true if one partner works and the other does not. 

Here are some differences and similarities in terms of what you could be entitled to if either type of relationship ends. 

  • In either type of relationship, both partners will often be entitled to an equal division of the couple’s assets if the relationship ends, unless a legal agreement (a co-habitation agreement or pre-nuptial agreement) states otherwise. However, this may not apply to properties with only one common-law partner’s name listed as the owner. 
          • If one spouse is working and the other is staying home, the working spouse may be required to continue paying support to the stay-at-home spouse, especially if one gave up a career in order to stay at home. If there are children involved, the breadwinner will end up paying child support based on a percentage of their income until the children are grown.
  • If you are in a common-law relationship and you believe you co-own properties with your partner, be sure to speak with a lawyer to understand what would happen to this property if your relationship ends.
          • Division of assets can be complicated enough when both partners work and contribute similar amounts to the couple’s overall living expenses. However, if only one person is working, the other is often considered to be a dependent, which could make things very complicated (and expensive) for the breadwinner if the relationship dissolves. 
  • In a marriage, if one spouse dies, the other spouse automatically inherits their wealth, including their pension survivor’s benefits. In a common-law relationship, this is not the case, so be sure to have a legal will if you want your common-law partner to inherit your assets. 

 

How do I financially protect myself from the impact of a breakup?

Both breadwinners and stay-at-home partners must take steps to ensure their financial interests are protected in case the relationship does not work out. 

If you are the stay-at-home partner, your financial interests are directly tied to your current partner, and while we wish you a long and happy life together, here are some tips to help ensure you’ll be financially sound if you break up.

Have your own savings 

The first way to protect yourself from the impact of a breakup is to always have your own money and your own skills. If you are staying at home and your partner is working, be sure that some of the money you are taking in is going to an individual savings account that is only in your name. If your relationship ends or your partner passes away, this money will help you get back on your feet while you wait for any settlement or inheritance money that is owed to you.

Plan for your own retirement

Similar to having your own savings, it is important for you as a stay-at-home partner to invest on your own and have confidence that you’ll be able to live comfortably as you age.

Keep up with your skills

Even if you give up your career to be a stay-at-home girlfriend, stay-at-home boyfriend, or stay-at-home parent, be sure to keep up-to-date on your most employable skills, in case you need to re-enter the workforce in the future. 

Get a cohabitation agreement or pre-nuptial agreement

Whether you’re getting married or are nearing the one-year anniversary of when you moved in with your partner, it’s important to have a cohabitation or pre-nuptial agreement drawn up by a lawyer. 

These are legal agreements that lay out the details of how assets will be divided in the event of a breakup, and what type of support will be paid by whom. 

By having a cohabitation or pre-nuptial agreement done when initially starting to live together, you can ensure your financial rights are protected before the anger and ego that accompany a divorce or breakup begin to cloud the judgement of both partners. That’s when things get messy. 

Have your own credit

Be sure that throughout your relationship, you continue to build good credit. You can easily do this by having a credit card in your name, and paying some of the household bills (ensure these are registered to you). Next, always, always, always pay the bills on time. This is how you establish a strong credit score which will help you be financially independent if your relationship ends.

 

The bottom line

While every person going into a long-term relationship intends to stay with their partner for the long haul, unfortunately, things don’t always work out the way we plan. That’s why it’s so important for people to take steps to protect themselves financially in the event of a breakup, especially when one partner is working and the other is not. 

 

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