Can You Afford to Stay Home With Your Kids?
This is a guest article by Mike Collins, creator of Wealthyturtle.com. He shares with us how he and his wife decided to become a single-income family, and he offers some useful advice for those struggling with the same decision.
Most new parents will at least consider the idea of living on a single income so one parent can stay home with the kids. But is this a realistic idea or just a pipe dream?
It’s a question my wife and I dealt with when we first started to build our family and it wasn’t an easy decision. In the end we decided that my wife would quit her job and we would find a way to make it work.
I’m not going to lie to you. It involved a lot of sacrifices and there have been times when we questioned whether or not we made the right decision. But ultimately I’m glad we did things the way we did.
How it happened
First, let me tell you a little about our situation and how we made our decision. Then, I’ll give you some tips about making the right choice for you and your family.
Way back in 2004, my wife and I were expecting our first child. Initially we figured both of us would continue to work. The plan was for my mother-in-law to watch the baby a few times a week and then we would find a babysitter to fill in the rest of the time. But my mother-in-law started having health issues and we realized that she wouldn’t be able to take care of a baby even for a few days a week.
We considered hiring a babysitter for the entire week, but the cost was just too much. When we ran the numbers and compared child care costs with my wife’s salary, we realized she’d only be bringing home a few hundred dollars a month. Most of the time she’d be working to pay a babysitter and that didn’t make a lot of sense to us.
Financial impact led to sacrifice
Meanwhile, I could tell my wife really wanted to stay home, and I leaned that way, too. My main concern was the financial impact of living on only one income. At the time she was earning almost as much as I was so losing her salary would effectively cut our income in half. Further complicating matters was the fact that we had just bought our first house. The monthly payment that we made comfortably on two salaries would become a heavy burden on one income.
Related: Learning to Live on One Income (By Choice)
Despite our financial concerns, we decided that my wife would quit her job. The years that followed involved a lot of sacrifices (skipping vacations, me driving a beat up old car with no air conditioning, falling into debt, constant stress about money), but we pulled through it together.
Of course, just because it worked out for us doesn’t mean that you should follow our example. If you’re thinking about becoming a single-income family to stay home with your kids, there are a few steps you need to take before deciding if it is doable.
Calculate Your Expenses
The first step in determining whether or not you can realistically afford to stay home with your kids is to add up all of your expenses to see exactly how much you’ll need to live on. Start by listing fixed expenses such as your mortgage or rent payment, utilities, car payments, student loans, and insurance.
Next, add in other monthly expenses such as food, clothing, gas, and entertainment expenses. You’ll also need to add in credit card payments and any other regular debt payments you make.
It’s a good idea to leave a decent cushion to cover miscellaneous and unexpected expenses that can and will pop up. And don’t forget that a new baby comes home with all sorts of new expenses of his own. Hospital bills can be shocking, and even the cost of diapers often surprises new parents who underestimated the cost of raising kids.
While you’re calculating your expenses, you should take a good, hard look at your spending habits. We all have money leaks that slowly drain our budget, and now is a good time to seal them up. Prioritize what matters most to you because choices are inevitable if you want to live on one income. You may have to settle for dining out less or downsizing your vacations for a few years.
Learn More: Travel Rewards Credit Cards — Get More Vacation for Your Money
Figure Out What You’ll Save By Not Working
Many people forget this side of the equation, but you might be surprised at how much money you can save by not going to work. No more gas and tolls to get back and forth from work. Less wear and tear on the car means it will last longer, too. And you won’t need to spend as much on clothes, dry cleaning, lunches, or your morning coffee for the ride to the office.
And then there are child care costs. If you have a family member who lives nearby and is willing to watch your little one, consider yourself lucky. If not, you’d have to pay a babysitter or nanny to watch your kids while you worked. Obviously rates vary from one region to another, but in my area the going rate for an experienced babysitter is $12 to $15 an hour. For a nine-hour day (don’t forget to add in commuting time) a babysitter could cost you between $500 and $700 a week.
Don’t Forget the Long-Term Costs
In addition to the affect on your family’s monthly balance sheet, the decision to become a stay-at-home parent will also have long-term consequences. You’ll have less money to throw into savings and investments. You’ll miss out on employer 401(k) contributions and your Social Security benefits may be reduced since you’ll have contributed less to your account.
When the time comes when you’re ready to re-enter the work force, you may have a hard time. Your skills will likely be a bit rusty and you may find yourself at a disadvantage. And since you’ve been out of work and obviously not receiving annual salary increases, you’ll probably end up earning less than you would if you had continued working.
Resource: 33 Great Work-From-Home Jobs (That are Legitimate)
It’s Not Just About Money
In the end, after all your calculations are complete and you’ve gone over all the numbers again and again…it’s not all about the money. While some women can’t wait to get back to the work routine after having a baby, others just can’t resist the maternal pull and feel an intense need to stay home. And knowing that your kids are being raised at home by a loving parent can give the income-provider a certain peace of mind as well.
What if you are committed to being a stay-at-home parent, but you’ve run the numbers and you don’t think you can afford to do it? It’s time to get creative and find a way to make it work!
My wife and I knew that we couldn’t afford to pay all of our bills on my salary alone, so we looked for other ways to supplement our income. My wife did some babysitting to earn extra money and also tried direct sales through Party Lite Candles. When that didn’t work out, she got her real estate agent’s license. Of course just as she got her license the real estate bubble burst, but she did have one successful deal.
Meanwhile, I got a part-time job at Babies’R’Us for a while to make extra money (and take advantage of the company discount). I also started building websites and blogs on the side.
Do It, Too: How to Start Your Own Online Business or Blog
Flash forward a few years and we’re a lot more stable than we were back then, though there were certainly some sacrifices along the way. It can be frustrating at times to watch your friends traveling and doing things that you can’t afford, but in the end I do feel we made the right decision for our family.
Have you and your spouse thought about keeping one parent at home, or even taken the plunge? How do you feel that decision impacted your family and finances?
Article comments
Realistically, one should think of the daycare costs as half the fathers’ and half the mothers’ responsibility. Assessing the daycare costs solely against the woman’s salary is not fair.
Also, it is important to note that daycare costs aren’t forever–they are significantly reduced when the child is out of the infant category, are reduced again when the kids are in school, and then when the oldest child is 8-10 years old they disappear entirely. So planning a woman’s entire life based on the cost of daycare for an infant is not appropriate.
Thinking of daycare costs as an investment in a woman’s career is more appropriate. We pay far more for a 4-year college degree: why are college costs considered “worth it”, while daycare for a few years is considered “not worth it?”
Raising kids is not a life-long endeavor. Your life is going to go on for many years after your kids are grown and gone—you need to plan even that far ahead. Both parents need to be realistic and make sure that they both have retirement accounts and could live independently later in their lives in case of divorce or being widowed —a lot of women end up divorced at 50 years old with no way if earning money, and alimony is increasingly being phased out so you can’t count on that either.
I respect parents’ feelings if they want to “be there” for their kids by staying home with them. But in almost all cases it is a huge financial hit and not a financial benefit to do this.
A few points i’d like you to clarify
“Realistically, one should think of the daycare costs as half the fathers’ and half the mothers’ responsibility.” vs “Thinking of daycare costs as an investment in a woman’s career is more appropriate.”
Why compare against 1 salary in the case of investment but 2 in the case of cost.
“Also, it is important to note that daycare costs aren’t forever–they are significantly reduced when the child is out of the infant category, are reduced again when the kids are in school, and then when the oldest child is 8-10 years old they disappear entirely. So planning a woman’s entire life based on the cost of daycare for an infant is not appropriate.”
Wouldn’t this mean that the stay-at-home parent is only planning the next 8-10 years not an “entire life”? Can’t they plan to return to the work force at that time?
I believe it would be better for the spouse to work part time to make ends meet. Interesting article!
Plenty of single moms raise their kids on one income, and they do not have any choice in the matter. If they can, anyone can.
Definitely things to consider even before you start having kids, how are you going to afford them?
The other side of this coin is, “could you afford to stay at home with one of your parents?” If you want your parent to live in a home rather than a facility, this could also become a reality. The only difference is, when you come to this decision, you are older and later in your earning years. This is a situation that many eldercaregivers find themselves in.
I’m glad you had the it’s not just about money section. My wife and I came to the same decision and I really relate. However, for us, hands down staying home was a money losing proposition. However, it was a good decision and my family benefits daily from having my wife at home. I only hope she can continue.
Excellent point about the long term effects of staying home with the kids. That is one reason women still earn significantly less than men over the long haul
My wife and I decided together that she would stay home with our son when he was born in 2010. We had crunched the numbers, and based off of what she was making and the cost of daycare it didn’t make a whole lot of financial sense for her to continue working. We would only come out a couple hundred ahead. Also we just wanted my wife to be able to be home with our son, and not have to put him in daycare.
We had lived primarily on my income for the few years before she left the workforce, and we had a brief stint where she was out of work as well, so we had plenty of practice in living on one income. Since she quit her job we’ve been doing just fine on the one income, it hasn’t been a huge stretch. Admittedly my blog income has risen at the same time, basically replacing her income, so I can understand how others might have a hard time living on so much less.
My fiance and I have talked about this. I’m the type of person that will want to keep working even if it would be part time. My mom still worked 40 hours a week and worked nights(though granted we all had different circumstances) and my dad was a teacher so at least we had one parent available at all times during the summer. I know I would want some extended time with my children once I start having them. Luckily, I work for a company that pays me well enough right now and offers extended leave(that is paid) and I can opt for some leave that is only partially paid. My fiance and I are lucky because our house is not that far from being paid off so not being able to work full time would not impact us as much.
I am still a few years away from having to worry about who if either of us will stay home with the kids, but we have talked about it and she plans on working part time. This is both to help out financially and help keep her sanity.
My wife went back to work when our daughter was 12 weeks old. Mostly she just wanted to keep up on her skills, have an identity other than “mommy”, keep contact with the outside world, stuff like that. Taxes and day care eat up well over half of her income, but she still makes enough that she feels it’s worth her time. She gets good benefits as well.
When we have a second child, which is our plan, we might have to rethink it. Nevertheless even if we end actually losing a bit of money by working, if she chose to do so, I would respect that.
If she (or I) does at that point choose to stay home, we could survive on one income relatively easily. We saved enough while we were DINKs that if we just let that ride for 18 years, we can retire when our hypothetical second child heads off to hypothetical university.
Sometimes the math is much simpler than in this post. If child care cost > second income. The rest of the math is moot. Day care in this area starts at $10/hr and up. Any job paying less than $10/hr is never going to be financially feasible no matter the other costs.
In my case the wife was making just over $12/hr. My wife was not interested in going back to work to bring home $2/hr. By staying home she increased her “side” income by more than she “lost” by not working.
That was my situtation too, not because I made $12 an hour but because I had two kids 17 months apart and day care is so expensive in our area. Now I plan to work from home even when the kids are in school.
My wife is a stay at home mom. It motivated me to find a better paying career.
I’m planning to become a stay at home dad soon. We cranked the numbers and it will work, but we’ll lose a lot of income. I’m tired of my job anyway and need a change so I think it’s ok. Financially we are doing ok, but we won’t be able to save as much.
My wife and I went through a similar decision. When we ran the numbers we would only be a bit ahead of the cost for daycare if we both worked. It just wasn’t worth it. Instead my wife took a leave of absence from her job and we lived off of my salary. We also saved up as much as we could but we found we were able to adjust our lifestyle (and let’s face it, with a newborn you aren’t exactly going out to the movies or restaurants often) such that we didn’t have to tap our reserves.
This is one of those hard family decisions to make. Good post. For me, I’ve had partners I dated mention this, but the whole putting my financial future in someone’s else hands made me past. I just remember so many female family members did this when I was growing up and how they struggled financially later in life after a partner choose to move on. Also, it is so hard for so many female workers to restart their careers. I have a friend going through that right now after taking several years off to raise her kids. Too bad more can’t be done about subsidized child care costs so that couples have more options.
I like krant’s idea. I think that it does make a lot of sense for someone to stay home or to go part time to take care of kids if their wage is similar to what it would cost for child care. You get to see your kid grow up rather than making a couple hundred a month. Worth it to me if both wage earners don’t make six figures independently.
I think there is another alternative, part time work. When our children were small, my wife worked part time skewed to the weekends (Friday & Saturday). She worked 20-30 hours a week and there were 2 hours when one of us was not there.
Krantcents,
Having mothered two kids I strongly disagree that the caretaker of babies and toddlers can also work part time. The kids are a full time and a half job!
My wife worked about 95% of the time when I was home with the children. It also gave me an opportunity to be close with my children. As a male, I think it is important to influence my children too.
My wife and I decided early on she wouldn’t work, so we didn’t have to give it as much thought as many probably have to. We just didn’t put into the calculation, knowing we wanted to have a family and have her home with the kids. I’m sure that would be a lot harder decision if we waited, she had a good paying job, and had to cut the income. She did school for a while and worked as a clog teacher just to help pass the time until the first baby came…. which is coming up in a few weeks!
Great post!
Wow, this article is extremely timely for me!
Currently I’m at-home with our first child and, I’m not going to lie, it does sting financially. However, these are also crucial developmental years for our baby, and my significant other and I both agree the sacrifices we’re making now will ultimately be worth it.
Sometimes, “it’s not just about the money”, which sums it up beautifully. We are also exploring innovative ways to supplement his income.