The Price of Staying Home With Kids

Trading a job to raise kids may cost more than you think.

After decades of decline, the number of stay-at-home moms is on the rise. A recent Pew Research analysis of census data found that 29% of U.S. mothers stayed home with kids in 2012. That’s up from 23% in 1999, the trough of a drop-off that began in the 1970s. Visit a park on a weekday morning and you’ll see that dads, too, are swapping desk chairs for high chairs. Some parents are at home for lack of a job. Those there by choice say you can’t put a price on sandbox time with a preschooler or heart-to-hearts while chauffeuring a teen. But parents should factor in costs beyond the commute, child care and a professional wardrobe before making the decision to stay home.

A lapse in retirement saving, for instance, can devastate a nest egg. A 25-year-old earning $40,000 a year and saving 13% of her salary (including any employer match) can expect to replace 50% of her income at retirement, according to a study by T. Rowe Price. But take three years off, and the replacement rate falls to 43%; five years, and it drops to 39%. To make up for a three-year lapse, you’d have to save 15% of your salary thereafter, or 17% of your pay after a five-year hiatus.

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Anne Kates Smith
Executive Editor, Kiplinger's Personal Finance

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage,  authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.