When I started my financial advisory business in the late 90s, it was still common to see a Single-income family. The sole breadwinner is the husband and the wife is just a housewife. In today context, we refer housewife as Stay At Home Mum(SAHM) and we shall use this term for the purpose of discussion. The financial planning process in those days were simple. We insured the husband from 5 to 10 times the annual salary. When I advice the husband to purchase an insurance for the spouse, the usual response was ” there is no need for them to buy an insurance since they don’t have income”. Is this true? We know a SAHM does not receive any salary but what is the economic value of a SAHM? Economic value is refer as the benefit provided by a good or service to an economic agent. In layman terms, it simply means how much do we need to replace a SAHM.
With the help of my lady friends, here are the common ‘job scope’ of a SAHM. The most common mentioned job scope is of a domestic worker. It ranges from preparing meals getting the children ready to school, washing the laundry, cleaning the house etc etc. The second most common job is a chauffeur, especially for family with children who are attending school. The SAHM’s job may be extended to sending the child to school, tuition centers and other enrichment classes as well as fetching them home. If the child is not attending tuition, the role of a tutor is added to the SAHM’s job scope. The SAHM becomes a nurse when the child is sick,. The job scope of a SAHM may varies from having a toddler to a teenager child but one thing is for sure i.e. there is no rest day! I guess there will be little argument if we have the ‘official job description’ for a SAHM to be listed as below.
Now, let us just look at the main job performed by a SAHM and the cost of replacing her if she decides to get back to the workforce. The average cost of employing a domestic worker in Singapore ranges from $1,000 to $1,500 per month. The cost depends on the nationality, experience , food & lodging, insurance etc. Let us take an average of $1,250 per month.
A career website has vacancy for chauffeurs and the salary averages at $3,000 per month.
The following shows the rate of tutors in Singapore and the source is from MindFlex Home Tuition.
Assuming a family as a child in Primary 2 with 3 subjects and another child in Primary 5 with 4 subjects. The children has 1.5 hours of tuition for each subject per week and the family engaged a Full-time (Non-MOE Tutor), the cost will be
Primary 2 child: 3 subjects x 1.5 hrs x $40/hr x 4 times a month =$720 /mth
Primary 5 child: 4 subjects x 1.5 hrs x $45/hr x 4 times a month =$1,080 /mth
That will be a total of $1,800 per month.
And since the SAHM is working now, the 2 children may have be in an After school Care center which cost an average of $350 per month each.
If we were to add up the total cost per month, the break down will be
|After School Care||$700|
The economic value of a SAHM is minimally at $6,750 per month. In other words, a SAHM should be paid at least $81,000 annually. Can we still say we should not insure a SAHM because she has no income???
Last but not least, I would like to take this opportunity to show my gratitude and appreciation to all Mothers out there, especially the Mother to my 2 boys – Happy Mother’s Day!