Parenting Insights
June 16, 2017
Deciding whether to stay home or return to work after having a child is a dilemma many parents face. With the soaring expenses of childcare, it’s common for parents to grab their calculators and assess whether their income can sufficiently cover these costs. However, economist David Johnson from the Center for Family Economics emphasizes that the decision involves more than just comparing salary and childcare fees.
To help parents navigate this decision, Johnson has created a calculator that illustrates the long-term financial ramifications of either working or staying at home. This tool allows users to input their age, gender, current salary, intended time away from the workforce, and retirement savings contributions. The outcomes can be either encouraging or quite disheartening, depending on your choice.
The inspiration for this calculator came when Johnson and his partner welcomed their first child. As they deliberated whether to pay for childcare or have Johnson stay home, they realized that discussions among friends in similar situations often revolved around immediate costs rather than the broader financial picture. “Many people were simply thinking, ‘I earn X, and childcare costs Y,’” he shares. He believes this perspective overlooks the additional long-term losses incurred from not working, such as missed raises and retirement contributions which accumulate over time.
For instance, let’s consider a scenario using Johnson’s calculator. Imagine a 29-year-old woman who began her career at 25, earning $40,000 annually. If she takes a year off to care for her child, she forfeits $40,000 in wages. However, she also faces a potential loss of $43,207 in retirement benefits and $57,095 in wage growth over her lifetime, totaling a staggering $140,302 loss in income.
Ultimately, even a brief hiatus to care for children can significantly affect your long-term earnings. The gender wage gap becomes even more pronounced after women become mothers, as taking time off can drastically impact their lifetime earnings and retirement savings. However, opting for childcare is not a straightforward solution either, as the cost of caring for a single child can exceed some college tuition fees. Additionally, there’s often societal judgment when parents choose to have someone else care for their child.
What families truly need are affordable childcare solutions alongside workplaces that do not penalize employees for taking maternity or paternity leave during evaluations. While we dream of a system with universal paid parental leave, such reforms are unlikely to happen soon. Whether you choose to be a stay-at-home parent or continue working, it’s essential to recognize that these challenges affect all parents.
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In summary, the choice between working and staying home to care for a child presents significant financial implications that extend far beyond immediate budgeting. Understanding the long-term effects is crucial for making an informed decision.