Here’s something no one really prepared me for when I became a parent:
Kathleen and husband Dustin Farhat pay $464 per week for childcare for 5-month-old son Brady and 3-year-old Jack while the couple works full-time jobs.
That’s $1,856 a month, about $500 more per month than their mortgage payment on their home in Bath, in Ingham County.
For baby Brady’s care alone, the Farhats pay $250 per week. That’s $12,500 a year, more than the average net cost for tuition, room and board for a middle class ($48,000-75,000 income) family at the University of Michigan.
Over the course of 50 weeks of childcare in a calendar year, the Farhats will pay $23,200 for their two children. The total by the time both leave for public school will likely be close to $100,000.
This story showed how expensive it is for a couple in Michigan to pay for childcare. I know for a fact the costs are much higher in other areas, especially in big cities.
People get very judgy of others when this topic is brought up.
How could you let someone else raise your children?!
How could you give up your career for your children?!
If you’re one of these judgy people please stop reading now. This is a judgment-free post on the financial implications of childcare. Being a parent is hard enough as it is and this is not an easy choice for families to make.
This is an emotional decision as much as it is a financial one but finances definitely come into play no matter which route you choose.
If one parent stays home, there’s lost income. It could also make healthcare and other benefits more expensive. You’ll lose out on tax-deferred retirement savings and the compounding benefits. Plus, being a stay-at-home parent is hard work. You lose out on the social aspects of the working world.
After having children I have a much greater appreciation for stay-at-home parents.
If you pay for daycare, it’s expensive — like really expensive. The national average is close to $1,400/month. Daycare for many could be more than the cost of a mortgage or rent payment, especially with multiple kids. Hiring a nanny could be even more expensive depending on where you live because you also pay medicare and social security taxes as their employer.
I know some parents who both work to lead a balanced life because working helps keep their sanity. I know other parents who have one spouse stay at home because staying home with their kids helps keep their sanity. I know parents who both work and end up losing money by paying for daycare. I know other parents who have one spouse stay home and end up with a huge opportunity cost of lost wages because they gave up a nice-paying job.
Unless you have grandparents who are willing to forgo their own retirement to watch your kids, there are no easy answers.
The tough thing from a financial perspective is daycare makes it difficult for people to save for their children’s college fund. The 529 can (and probably should) take a backseat to retirement savings and all of the other new expenses that come with having a child.
On the bright side, once the kids are off to school you now have some room to breathe financially. I have friends who welcomed private school tuition once their kids became school-aged because it was actually cheaper than daycare. If you have good public schools (we do thankfully), even better, you’ve now freed up a huge fixed cost.
If you were paying for daycare you can now use that cash for savings, debt repayment, or other financial goals. Or the spouse who stays at home may now choose to go back to work, which can boost your income to play catch-up on things that may have taken a backseat financially.
My wife and I thought long and hard about this decision and I feel for her because there is a lot of pressure on the moms in this situation. On the one hand, there’s pressure to stay at home with your children but on the other hand, there’s pressure to continue working to provide an example to your children. There are judgments coming from both sides.
We decided to use a local daycare and we’re happy with that decision. It helps that we have an excellent daycare provider close to our house that came highly recommended. We both have flexible jobs so it’s not unusual to pick up the kids early.
The kids love it. They learn. They have fun. They have little friends. Food is provided and they learn more than we could ever hope to teach them on our own. Our oldest daughter goes to kindergarten next year and going to daycare has more than prepared her for school in a number of different ways. She’s known some of the kids in her class since they were 3 months old.
Having twins complicated things from a financial perspective (there’s not much of a break in cost for multiples) but it helped to know we already had a great option for them.
Perfect balance in all areas of life is a pipe dream. There is no such thing as work-life balance. People who focus on their career will likely miss out on family life at times. And people who focus all their energy on family life will likely miss out on their career goals.
This is one of those decisions you can run through on a spreadsheet all you want but will end up being more about your own situation and feelings. There is no right or wrong answer, either financially or emotionally.
My advice is to do what works best for you and your family and ignore judgments from other people. They’re not the one changing diapers.
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