When it comes to raising a family, childcare costs are a huge expense that can start to rival your mortgage payments. With daycare costs as high as $2,000 per month in major cities, many families opt out altogether, and instead choose to have one parent stay home.
While this might seem economical at first glance, it has a catastrophic long-term negative impact of the lifetime income of the parent that gives up their career, even for only a few years, in order to care for their child.
Childcare is not paid out of one partner’s income, it’s a household expense
I hate when I hear a new mom say the reason she decided not to go back to work is that her monthly income would be a piddly few hundred dollars (if that) after childcare expenses. Many women do the math that if their take home pay is $2,500 per month and they spend $2,000 per month on childcare, they are working full-time hours for a net income of only $500 per month.
Your child isn’t only your child, and therefore the cost of their care isn’t only your responsibility. If both partners are working full-time, then a portion of both of their salaries goes towards childcare expenses. If you earn $2,500 per month and your spouse also earns $5,000 per month, then proportionally you are bringing home 1/3 of the household income and they are bringing in 2/3’s. As a result, you should see it as you’re picking up the tab on 1/3 of childcare expenses, and they’re funding the remaining 2/3. This is the appropriate breakdown to split child-rearing expenses, whether or not you’ve merged bank accounts.
Even the Government of Canada does its calculations proportional to income when determining how much each parent should pay towards child-rearing expenses in separated and co-parenting families. Separated parents split the costs between them, so a portion of the total expense comes out of both their incomes. If you see childcare expenses as coming out of only one person’s income, all you’re really doing is punishing your partner for shacking up with you. Not cool.
You cannot afford to miss out on years of work experience
The finances of one parent staying home to care for children full-time isn’t only about the net income to the household for that year, there are significant long-term costs to be considered. If daycare will cost you $24,000 per year, you might think you’re “saving” $24,000 in expenses by having one parent stay home full-time. But how much damage are you doing to your career?
Every year a person stays out of the workforce, they miss out on experience, networking, promotions, and raises. Certifications and memberships lapse and expire, skills get rusty, and connections are lost. The long-term costs of interrupting your career are substantial, and far more expensive than the out-of-pocket costs of daycare.
Your foot in the door (or rather, on the corporate ladder) is as important as your paycheque. Don’t step out of the workforce because off-the-cuff calculations suggest you wouldn’t be earning enough to “justify” working full-time. Your career is justifiable. Your work matters. What you do is important, and what’s more, it’s equally as important as your partners’ work. Research indicates that workers can expect to lose up to 3 to 4 times their annual salary for each year out of the workforce.
A woman earning the median salary for younger full-time, full-year workers—$30,253 annually in 2014—who takes five years off at age 26 for caregiving would lose $467,000 over her working career, reducing her lifetime earnings by 19 percent. – The Hidden Cost of Interrupting a Career for Childcare
The real cost of staying home with your child full-time is not the difference between your salary and daycare, it’s the years of lost opportunities and missed promotions, which is a multi-six- or seven-figure bill. You can’t afford it.
The “Mommy Tax” is real, and this is why it happens
When it comes to income loss because of parenthood, women bear the brunt of the burden. In fact, where having a child typically has a negative impact on a woman’s career and income, it usually has a net positive impact on those of a man’s. As a result, mothers earn as much as 14% less than childless women.
There are a number of reasons for this, virtually all of which can be summed up in two words: “The Patriarchy”. However, if you want to get specific, the main one is that women are still the default primary caregivers of children. While it is becoming increasingly common for men to take longer parental leaves or become a stay-at-home dad, it’s nowhere near equal. More often than not, it is the mother’s career that is stopped and stunted in the name of providing childcare, and the reasons for this are everything from her income usually being lower (remember the patriarchy?) and her being perceived as the more natural and nurturing parent (there it is again, the patriarchy!).
Unfortunately, this is so ingrained in our culture and society, undoing it will take a few generations and progressive legislations, like mandatory paid paternity leave. It likely won’t be happening in your lifetime, which is why you have to recognize daycare as one of the best career and income protections available to you as a woman.
It might be the best $2,000 per month you ever spent!
Hadn’t thought of the hidden costs of removing oneself from the workforce before. What are your thoughts of part time working as a compromise? In my profession, heavily female dominated, it is very common to reduce hours by a half or third after having kids.
That’s an awesome compromise — because even if your income is reduced while you work part-time, you’re not letting your skills lapse or miss out on any networking opportunities.
Also, it doesn’t take into account workplace benefits for braces and a workplace retirement plan. This sets households up in a much better place financially later on in life.
Great post Bridget! I am surprised that daycare expenses are being shouldered 100% on the mothers budget, that’s shocking to me- I agree that it should be shared based on the total income. The other two words that add to this problem is “mom guilt” and I am already feeling it, and haven’t even gone back to work yet! You feel guilty being at work and then you feel tired when you’re at home.
These are such good points! I think it also comes down to your personal goals and preferences, too. Some parents just want to stay at home with the kiddos, and money plays a small contributing factor to that as well.
We don’t have kiddos yet, but I’ve been thinking about exactly how we’d handle daycare. I think I’d like to stay at home for the first year of their life, mostly because I personally don’t like putting newborns in daycare (family members had scary experiences).
At the end of the day, it’s all about doing what’s best for your family. If you feel fulfilled at work and want to stay there, then stay there! Like you said, it’s not always just about the money.
In the US there is also an option to do an FSA. You can pay daycare costs in this tax-sheltered account that allows you to reduce your annual household income. If you’re paying for daycare anyway, why not do it through an FSA and not pay taxes on that income (since it helps you earn an income anyway)?
That’s awesome! I didn’t know about the FSA. That’s great that there’s something to help families a little more.
I definitely think moms should be home full-time the first 6 months, if only to make breastfeeding easier (it’s so hard, but harder still if you immediately have to switch to pumping after 6 or 8 or 12 weeks) AND also to recover from the birth. My baby is almost 3 months old now and my joints STILL feel wobbly and I have no core strength whatsoever.
Also the sleep deprivation! How productive are you at work if you’re still getting up in the middle of the night to feed & cuddle a baby??
How do I LOVE this?
I get so much harassment because after daycare I *only make* a bit after daycare costs.
Well, actually in-laws, your son works out of town, so without me how much would he be shelling out for a full-time nanny?
A women does not and should not have to choose between being a mother and having a career.
Moms deserve all the benefits of working, and they’re NOT just monetary — what about the social aspect, sense of accomplishment, etc? Being a parent is obvs the most important job, but there’s no denying people get a ton out of their work.
Why do you say parenting is a job? It’s a gift and it’s not a job it’s parenting. If you see it as a job, I feel bad for you.
I passed/didn’t bother applying for at least four different position changes/stipends (all = extra money) because I knew I had a mat leave for part of this year. It’s bananas.
As much as it pains me to say this (because I don’t want to leave HP right now), daycare is also really, really good for kids. It could be my bias as a teacher, but there is so much value that comes from early childhood education. It’s an investment in that regard, too.
Now to go back to figuring out how to freeze time. There’s money in that, right?! 😉
100% agree. I think it’s healthy for kids to spend time with adults other than their parents and other kids!!
If you find a way to freeze time let me know… I can’t handle how fast my baby is growing!
Not to mention the social benefits of the child being in daycare around other children-learning, playing, sharing…. Learning to listen to someone other than mom and dad!
So agree!! Even though I do work from home, I’m planning on daycare for my baby so I can do work and so she can make friends!
You have so much great info here! As a new mom with a 7-month-old I have had all the mom guilt thoughts that I should stay home with her. But at the end of the day, I LIKE my job and I have to remind myself that it would be incredibly hard to get a comparable position in my location if I off-ramped for a while.
If someone wants to stay home with their child to raise them, I 100% respect that decision. But if they think they HAVE to because of their salary, I will remember your calculations here.
And that’s to say nothing of potentially losing your work’s healthcare option in the US. Even if you are a 2-parent family, usually one person has a better or cheaper plan, and if that’s yours, everyone, including your child lose access to that. Jeeez, and losing our on tax-advantaged retirement plans…and the matching!
$467k is very inflated. It appears to be a simple time value of money calculation. Forgoing 30k for 5 years with assumed inflation of 2% and then investing those funds for the next 34 years would equal close to 467k.
What’s missing here is the tax savings and the increased CCB benefits as a result of reduced income. If you reduce income by 30k a year your CCB monthly payment increases. In BC we also get additional monies from the province of family income is under 100k. You are also saving child care costs of (in my city 12,000/year) and you also bring down the family income which means your spouse or partner can claim you as a dependent which significantly reduces their taxes. You may qualify for EI and other social assistance programs.
$467,000 is not inflated, considering the average income is closer to $45,000 and many people earn much more than that. An adult withdrawing from the workforce misses out on raises (3-5% per year), which would compound for the rest of their working lifetime. They also lose any employer benefits and retirement matching.
Even the maximum CCB is a piddly $500 per month, which doesn’t cover the cost of diapers, clothing, food, and RESP contributions, let alone the increase in shelter costs, which has been identified as the biggest increase in monthly budget expenses for parents.
$12,000 per year in childcare costs is petty change and not worth sabotaging a career for.
I’d be impressed with any family in Vancouver that can raise children on less than $100,000 per year. That is simply not a reasonable ask.