Getting a more complete financial picture of Stay-At-Home parenting
Now that more of my friends have kids, it's interesting to see how couples choose to divide up paid employment vs childcare. My favorite so far is the Bensons, who each work at paid employment a few days of the week, so they take turns with childcare. It looks like the Kullas do something similar. This is less practical when your baby is breastfeeding exclusively and won't take a bottle, or when both parents can't work from home (or farm). But there are probably as many different ways to handle this as there are couples.
Of all reasons to stay at home, obviously the best is non-financial: to raise your own children. This post isn't about that, it's about the money. The typical economic formula people use to figure out if they should return to paid employment after having a child is:
S - C
Where S is the salary of the potential stay-at-home (SAH) parent, and C is the cost of child care. If S is more than C, then grab your briefcase and get back out there in the working world!
I'd like to propose a slightly more realistic formula:
S - (C + E)
Where E is "everything else a SAH parent can do at home to contribute to the family's bottom line." Here are some ways that our family is saving by having one parent at home (usually Venessa, though she is back to working at home...YUM!). I've also included an estimated yearly cost if we had two parents with paid employment¹:
* First, the value of C: a full-time nanny for a year = $30,000
* We have time to launder cloth diapers and wipes = $750
* Venessa can nurse Lillia, so we don't need formula, bottles, pump, etc. = $1,200
* We have time to bargain shop at thrift stores or pick up craigslist finds = $350
* We're paying less income tax = $5,000
* I can take lunch from home (leftovers from homemade meals) = $500
* Also, when we go out for dinner it's by choice, not due to time constraints (i.e. we dine out less) = $250
* I commute by bike, and Venessa's paid employment is at home = $1000
* Many of our daytime hobbies (beekeeping, canning, gardening, chickens) are money-saving = $500
That's approximately a $40k salary right there, or a $19 hourly wage at a 40hr/week job. There are probably some other factors that I'm forgetting or that are harder to quantify (e.g. children in daycare get sick more often at first).
There are a few caveats to keep in mind:
* Will you be leaving any workplace perks behind? 401k match, life insurance, etc.
* Will you be able to get back into the workforce when you're ready?
* What if the person with paid employment gets laid off? I recommend everyone having a 3 - 6 month emergency fund, but this is especially important for parents.
Like I said, this is a very personal decision. I just want to make sure people are looking at the complete picture when they make this decision for their family.
¹ Source: http://www.babycenter.com/baby-cost-calculator and http://www.thesimpledollar.com/2007/12/17/the-real-value-of-stay-at-home-parenting/ This is going to vary a lot from family to family, based on many factors.
Of all reasons to stay at home, obviously the best is non-financial: to raise your own children. This post isn't about that, it's about the money. The typical economic formula people use to figure out if they should return to paid employment after having a child is:
S - C
Where S is the salary of the potential stay-at-home (SAH) parent, and C is the cost of child care. If S is more than C, then grab your briefcase and get back out there in the working world!
I'd like to propose a slightly more realistic formula:
S - (C + E)
Where E is "everything else a SAH parent can do at home to contribute to the family's bottom line." Here are some ways that our family is saving by having one parent at home (usually Venessa, though she is back to working at home...YUM!). I've also included an estimated yearly cost if we had two parents with paid employment¹:
* First, the value of C: a full-time nanny for a year = $30,000
* We have time to launder cloth diapers and wipes = $750
* Venessa can nurse Lillia, so we don't need formula, bottles, pump, etc. = $1,200
* We have time to bargain shop at thrift stores or pick up craigslist finds = $350
* We're paying less income tax = $5,000
* I can take lunch from home (leftovers from homemade meals) = $500
* Also, when we go out for dinner it's by choice, not due to time constraints (i.e. we dine out less) = $250
* I commute by bike, and Venessa's paid employment is at home = $1000
* Many of our daytime hobbies (beekeeping, canning, gardening, chickens) are money-saving = $500
That's approximately a $40k salary right there, or a $19 hourly wage at a 40hr/week job. There are probably some other factors that I'm forgetting or that are harder to quantify (e.g. children in daycare get sick more often at first).
There are a few caveats to keep in mind:
* Will you be leaving any workplace perks behind? 401k match, life insurance, etc.
* Will you be able to get back into the workforce when you're ready?
* What if the person with paid employment gets laid off? I recommend everyone having a 3 - 6 month emergency fund, but this is especially important for parents.
Like I said, this is a very personal decision. I just want to make sure people are looking at the complete picture when they make this decision for their family.
¹ Source: http://www.babycenter.com/baby-cost-calculator and http://www.thesimpledollar.com/2007/12/17/the-real-value-of-stay-at-home-parenting/ This is going to vary a lot from family to family, based on many factors.