One of the most common questions that every new parent faces is, “Should one of us stay home and care for our child(ren)?” It may not be with the first child, but as your children multiply, life becomes more expensive.
According to Motherly’s 2023 State of Motherhood report, 25% of survey respondents referred to themselves as stay-at-home parents, compared to 15% in 2022, which shows this question is becoming more seriously discussed in families, especially as childcare costs are rising at nearly twice the rate of inflation. Before making any major decisions, it’s important to focus on all of the financial considerations.
There are positives and negatives to both options, and ultimately it is a deeply emotional and personal choice to make, but it’s a healthy exercise to weigh all the financial pros and cons of one individual staying at home with your child(ren). Here are a few of the big ones to consider:
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Income
The most common reason I hear for people deciding to stay at home is childcare costs. As a mom of two boys, I completely understand this decision, because childcare costs are sky-high. While the cost may vary based on the age, location and level of care needed for your child, the average annual costs for U.S. childcare range from $5,000 to $17,000. If you hire a nanny, it’s even more than that. So whether you choose a nanny or a daycare facility, it’s all super expensive.
Sometimes it doesn’t make sense to pay someone else for childcare if you aren’t taking home any extra income, but there’s something people rarely consider — what are your future earnings?
Ask yourself: How much will you eventually make in your current role in your career or in future roles? Yes, at this very moment, you may not be taking home extra, and paying for childcare might be a wash, but if you exit, what promotions or raises will you no longer be able to receive?
Another thing to ask yourself: Are there additional perks, like bonuses? Or reimbursements for education that would make you a more valuable employee and therefore increase your salary?
If the answer is yes to any of these questions, then it needs to be factored into the decision.
Retirement savings
If you aren’t working, then you probably will not be saving for retirement, so the beauty of compounding is not happening! Starting early and staying consistent is what makes most people successful in their retirement savings plan.
Also, if your company does a match or any kind of retirement contribution, then you are missing out on receiving that, which could be big dollars in the future.
Again, this is a factor that does not affect you today, but it could cause you to delay retirement, or you could be forced to save more aggressively as you age.
College savings
If one of your goals is to be able to help pay or fully pay for your child’s education, then saving early is critical. (Back to that magical compounding thing!) This is personally a goal of mine and my husband’s, so we have a certain percentage of our funds that automatically transfer to the kids’ 529 plans every month. Without income coming in, budgets are a little tighter, and it’s usually more challenging to save for this additional bucket.
Insurance
In my mind, this is a critical factor. Regardless of whether you stay at home or keep your job, make sure you are covered when it comes to insurance.
First, for health insurance, you should consider which spouse has the most beneficial coverage, as this may factor into who will stay at home.
Ensuring you have adequate life insurance in place is also important. If the worst happens, then you will need extra income to care for the children so that the surviving spouse can provide for the family. Just because you don’t have the income of both parents coming in, doesn’t mean you shouldn’t have coverage.
It's not always about the money
Some people are especially good at being stay-at-home moms or dads. Through the past eight years of being a mom, I’ve met amazing parents who are fulfilled by taking care of their kids and love the daily interaction. It’s a big job, though, and not everyone is suited for this path — so make sure you do some true soul searching to ensure it’s the right decision for you.
But there are others, like me, who love their children but also love their careers. Balancing life and work is not easy, but the juggling is part of what makes me happy. I love to be busy and challenged in everything life throws my way, so regardless of providing for my family, working was always best for my overall well-being and, ultimately, our family. If working makes you happier and a better parent, then find a way to keep doing it, regardless of money.
There are, of course, many more emotional reasons to consider when making this decision. Just make sure you look at the full picture both in present day and for the future, because it’s easy to get tunnel vision. Whatever you choose to do, know this: Your kids will be OK! Working parents and stay-at-home parents both raise successful children.
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant.
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