Calculator: Should You Stay Home with Your Kids?

Children are wonderful, but most new parents are surprised to learn just how expensive their little cuties can be.  Between diapers, food, clothes and toys, the bills really add up.  But few expenses can lead to the jaw-dropping sticker shock as childcare.

In many cases childcare may end up being more expensive than housing costs or even college tuition!  According to a 2016 report by Child Care Aware, the average annual cost of full-time care for an infant in a center ranged from $4,822 in Mississippi to $17,062 in Massachusetts.  Care was also found to be less expensive for older kids, but more expensive in urban areas.

Growing families must decide if it makes more sense for someone to stay home with their kid(s) or if they should seek a job and pay for daycare.

To help settle the debate, Michael Madowitz (an economist at the Center for American Progress), developed an excellent calculator for you to figure out the long-term impact of this very important decision.

I created this estimate for a 31 year old male making $44k, who was considering taking off 3 years to care for a child.  All told, this person may miss out on $407,734.

Most people only consider the cost of daycare against their potential lost wages.

Would I make enough money (after-taxes) to pay for childcare, with enough money left over to make it worth all that effort?

But, as the calculator reveals, we also miss out on wage growth and retirement contributions.

  • LOST RETIREMENT ASSETS AND BENEFITS: The combined losses from missed 401(k) plan contributions while on leave and the lost growth of those assets until retirement and reduced Social Security benefits.
  • LOST WAGE GROWTH: The cumulative effect of time off on future earnings.  This is because you can’t gain experience and earn raises / bonuses when you aren’t working.
  • LOST WAGES: The number of years a worker is out of the labor force multiplied by his or her pre-leave salary.

I understand that this is a deeply personal decision… as unique to your situation as you and your lovely family.  Look beyond the numbers to consider other important factors, including your child’s physical and developmental needs, the availability of quality and affordable care in your area, and of course your job opportunities.  The finances should only be one part of your decision.

Run the calculator yourself to see what makes sense for your family.

The Hidden Cost of Childcare