Deciding if a parent should work outside the home is never easy. There are many potential cost savings that can be gained by a parent staying home to care for the children. On the other hand, there is also a loss of income.
Typically, couples have more options when one spouse has a significantly higher paying job or more work flexibility than the other. Some people believe a couple can afford to live on a single income because childcare and other expenses linked to work usually use all of the second income. But this isn’t always the case.
There’s not a single approach that will work well for all families. Analyzing the details for your own situation is your best bet.
Let’s take a look at some factors to consider when making this decision:
- Day care or nanny expenses in your area. We typically find these costs run between $600 to $1,000 per month per child. How much of the extra income is going just to cover this cost?
- Wardrobe. Will you need clothing and accessories for work that cannot be satisfied by what might be worn at home? Remember dry cleaning costs as well.
- Commuting. Does working require an extra car? Even if you already keep two cars, the cost associated with gasoline, tires, maintenance, parking, tolls and more need to be considered. Or if using public transportation, make sure to add those costs in as well.
- Food savings. This is a big one I see that many people ignore when weighing their options. When one parent stays home, there is the potential to cut down on lunch costs and the morning stops at those expensive coffee places. And, for some, when one parent stays home you may have more meals prepared in home rather than take out or dining out, but all of this will vary dramatically by family. The bigger issue I see when talking to clients is the extra costs paid for convenience or not planning food costs out or just food waste. This can happen even if one parent does not work outside the home, but I see that it seems to happen more often when both parents are working outside the house and are short on time. Just something to consider based on your current behavior with meals.
- Home based work options. Maybe one parent can telecommute part-time. There is also the opportunity to start a home-based business that could result in income. This might require part-time day care, nursery school, or simply waiting until the child is old enough to start regular school.
- Simple living. As I mentioned above regarding food costs and extra expenses associated with conveniences, consider how chaotic your life is or would be when both parents work outside the home. Is travel required for work? Overnight stays? Long hours? Those extra demands, even if just periodic events, can zap your energy and add to chaos in a family. That’s when I see most folks paying “whatever it costs” to take care of their life. So, if both parents work outside the home, consider how much chaos is added in your life and will there be convenience costs associated with it.
- Net income after taxes. If one spouse is in a significantly higher tax bracket than the other, the lower earning spouse may see a greater portion of their income being gobbled up by being “pushed” into the higher bracket along with their spouse. Testing different filing options is something that should be considered but usually, it’s not a significant difference.
When It Might Make Sense to Keep On Working
Mortgage qualification. A second income can make it easier to qualify for a mortgage. But be careful, if you can’t qualify with the one income, you might be on thin ice if you ever decide – whether by choice or necessity – to live only on one income.
Retirement Income. You can miss out on a lot of retirement savings, Social Security credits (for whatever that may be worth these days) and individual account contributions by not working, although you may still be eligible for a Spousal IRA.
Future ability to be employed. Is your current career important to each of you? Dropping out of the workforce can stop your career cold. Consider where you would be likely to be in 10 years if you continued working. You might not even be able to start at the same level you left.
Potential divorce, disability, death. Sorry to be glum, but sadly many couples don’t grow old together or at least not in the way they originally pictured it. So consider the financial ramifications that anyone of these circumstances would have on you and your family.
One parent staying home with the children can be wonderful for the kids. It can also be a financially reasonable solution, depending on the specifics. Before making a rushed decision, consider the long-term impact and if it’s the right move for your family.
Have you stepped out of the traditional workforce to stay home with your child or children? Why? What is and is not working for you? Let me know in the comments below.