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Finances for Stay-at-Home Moms

When one parent decides to stay home with the kids, many couples fix on merging all of their finances. While this is certainly convenient since you're now living on just one paycheck, it's not always the smartest move. As we all know, life is unpredictable. We lose jobs, get divorced and even become widowed. When stay-at-home moms and dads maintain some level of financial independence, many experts believe the unit as a whole is better able to withstand life's setbacks -- and even more mundane things like buying a new home.

Here are three steps stay-at-home parents should take to better manage their own and the family's finances:

1. Maintain (or Improve) Your Credit Score
If you do nothing else, make sure you maintain (or, if necessary, boost) your credit score. You can do this by keeping your own credit card and making sure to pay your bill on time. If you decide to close an account, especially one that you've had for a long time, you risk lowering your credit score since one's length of credit history is a fairly significant component used to calculate your credit score.

Why it matters: One reason is because you may end up paying more for a mortgage, car financing or even homeowner's insurance if you let your credit score slip. When couples jointly apply for a loan, the lender looks at both borrowers' scores and often bases the interest rate on the lower of the two, says Adam Levin of consumer education website

Also, when your spouse passes away, his credit score goes with him, warns Levin. So if you've been getting by on your husband or wife's good credit, you could suddenly find lenders aren't so willing to deal with you. Or, not at the competitive interest rates you're used to.

2. Get Your Own Credit Card
If you've already closed out your own credit card account and now share a card with your spouse, it's time to apply for a new one. And don't delay. Thanks to the recent credit card reform rules, banks are now holding applicants to a means test, says Levin. Without an income, stay-at-home parents could have difficulty securing a credit card of their own in the future.

Why it matters: As I mentioned above, having your own credit card helps you maintain your credit score. A card can also help boost your score if it increases the total amount of credit you have access to -- something the credit scoring folks like -- provided you don't drastically change your spending habits. Consumers with low credit utilization ratios (that's your amount of available credit versus how much of it you spend) tend to have higher credit scores since this is another component that goes into the credit score calculation.

3. Keep a Separate Bank Account
In the horrible event your spouse passes away, you'll need access to cash so you can pay your bills. The best way to do this is to keep (or open up) your own bank account.

Technically, if both you and your partner are named account holders on a bank account the financial institution shouldn't freeze your assets during the probate process. But that doesn't always happen, says Levin. Sometimes when there are extenuating circumstances -- think excessive debts -- the surviving spouse could get temporarily locked out of an account until until everything settles out, he says.

If you don't want to keep your own account, at the very least ask your bank about its policy when one account holder passes away.

Did you merge all of your finances with your spouse? Do you plan to change the arrangement now that you've read this post? Or, are you comfortable with the way things are?

Free Sweet Baby Kisses image by D Sharon Pruitt, courtesy of CC 2.0.
Stacey Bradford is the author of The Wall Street Journal. Financial Guidebook for New Parents.