Weighing the cost and benefits of staying home to raise the kids

Households with two wage earners face a tough decision in the child-raising years. Given the high cost of taking care of children before they’re in all-day school — and, often, the cost of after-school help, too — one parent often stops working, for a year or for several.

The coronavirus pandemic has pushed this decision on even more couples because preschools and elementary schools, as well as vital after-school programs and support, can’t operate as usual. And caring for young kids 24/7 with both parents trying to work full time is a logistical nightmare.

A layoff also prompts a decision: Look for work or keep the trains running in your reconfigured family life during the pandemic?

The decision, of course, revolves around what’s best for your family. And money isn’t everything. But it helps to understand the true financial impact of one spouse leaving the workforce for an extended period. It’s likely bigger and longer lasting than you imagine. Thankfully, there’s a calculator that can help you estimate the true cost and figure out whether time out or paying for childcare makes the most financial sense.

Free calculator 

Let’s consider a 30-year-old mother making $60,000, saving 10% of her salary in a 401(k), with a 3% employer match, who decides to take just one year off. According to an estimate by the Center for American Progress, the lifetime impact of that brief hiatus is nearly $180,000. The CAP calculator factors in the impact of lost wages, the impact of lost wage growth, the lost savings and compounding of the 401(k), and the eventual lower Social Security benefit due to lower lifetime earnings.

The free Center for American Progress Child Care Cost Calculatorcalculator from americanprogress.org, nwsdy.li/carecost, makes assumptions: It presumes everyone stops working at age 67; it plugs in a variety of conservative estimates for life expectancy after retirement; and likewise estimates a portfolio’s rate of return.

Let’s consider life without COVID (please!) in which a 28-year-old woman is doing some advance thinking, and figures she might take off two years starting at age 35 to have a kid. She started working at 22, and right now earns $60,000, and is contributing 10% to her 401(k) and her employer kicks in a 3% match. Those two years off (at 35 and 36) translate to a loss of around $330,000.

Here’s where it gets big: If she stays out for five years, which many parents of young children do, the total financial loss over her lifetime is $900,000. Today’s childcare costs have to be paid out of pocket, and that $900,000 is mostly made up of future income, true. But it’s a valuable yardstick.

The benefits to working, it must be said, aren’t purely financial. The same mother who loves her kids can also love a career. So, the psychological cost of having her take this hit for the team needs to be part of any decision.

Why the focus on women? Because it’s women who typically stop working. Still. In 2019 the labor force participation rate for women with children under age 6 was 10 percentage points lower than for mothers with kids at least 6 years old.

And the pressure on women to be superhuman jugglers has only increased during the pandemic. Surveys show women handle more of the home schooling, more of the cooking, more of the cleaning.

Consider the options 

Given the six-figure hit to quitting work, it may be beneficial to carefully consider alternatives before taking even a temporary leap off the work track.

At the point when it is safe to hire caregivers, the math suggests that paying someone to help will cost less.

Negotiating a more flexible work schedule, rather than quitting, could help in the meantime. That’s for both you and your spouse to consider, not just the lower wage earner. This is admittedly tricky.

We are already hearing plenty of chilling stories about employer inflexibility toward working mothers. (A web search of “pandemic motherhood” will provide you the anger-inducing articles.) But if you are in a work situation where your manager could be flexible, it’s likely on you to start the conversation.

And then there’s the intra-couple rethink that needs to happen. Consider what happens if there is a more equitable distribution of childcare and housework. Even getting to the vicinity of a 50-50 split of the most time consuming (and draining) jobs might give a few mothers the breathing space, and psychic lift, to continue to work. That’s good for the family finances, and equally important, fair to all women who have worked way too hard to get where they are.

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