Should Both Parents Work?
By Ric Edelman
If you’re married, it’s likely that both you and your spouse work outside the home. DINKs -- dual income, no kids -- are the norm. But what happens when DINKs start having children? Does it really make sense for both parents to work while raising young children?
There are two conflicting answers. The first answer says the costs of raising and supporting a family are so high that, to survive financially, both parents must work. The other contends that the other costs of having both parents work -- emotional and stress-related -- are so high that it’s better for one parent to stay home.
Why Both Should Not Work
Let’s examine what it costs to raise children. The federal government pegs first-year costs at $6,490 to $13,430. Unreimbursed medical bills for the obstetrician and hospital alone will be $1,200; maternity clothes, nursery furniture, baby-related equipment, clothes, diapers, formula, food, pediatrician, and other expenses constitute the rest.
But that excludes day care. If both parents work, add $10,000 to the bill. Thus, you’re looking at perhaps $20,000 in first-year baby costs. At that price, many couples are convinced both parents must produce an income, and if one parent wasn’t working before, the pressure to start is very high.
But is this the right conclusion?
Let’s assume our new parents each earn $30,000 a year, for a combined income of $60,000. To maintain their ability to support the family, especially considering the new expenses that come with their baby, they feel both must keep working. But is this second income really necessary for financial survival?
A $30,000 annual income is $2,500 a month. From that, most people spend about $250 a month in commuting costs; this covers either the cost of an automobile and parking fees, or public transportation -- your choice.
Also, you’ll spend an average of $125 per month on work clothes. (On-the-job wardrobes extend beyond those who wear uniforms. Office workers buy suits and ties or silk blouses and pantyhose. It all adds up to about the same expense.) You’ll spend an additional $120 per month on lunch, office gifts, and obligatory donations. And don’t forget day care at about $800 per month. In total, you’ll spend $1,300 per month in work-related expenses -- about half of one spouse’s total income. “That’s no problem,” you say. “I still net $1,200.”
Don’t forget taxes. If you gross $2,500, you will lose about $1,000 in taxes. Therefore, your net after-tax, after-expense take-home pay is about $200 a month. That’s less than $50 a week. If you work 40 hours a week and devote one hour daily dressing for work and commuting, you’re going through all this for about $1.25 an hour. And that’s on a $30,000 gross income!
It gets worse. Not only are you netting way below minimum wage, think about all the time you’re not spending with your child and the additional stress added to the family by the fact that both the husband and the wife are working. Who stays home when the baby is sick? Who leaves that important meeting to race to the day care center before it closes? Will it be you or your spouse who takes vacation or sick leave because the plumber is scheduled to stop by? Considering all the non-economic issues affecting the family, does it really make sense for both parents to work?
Five Reasons Why Both Should Work
From this analysis, I may have led you to conclude “no.” But it’s not that simple. Thus far I have presented only half the issue, so let me come to the defense of women who have young children and who work outside the home. There are five reasons why it can make a lot of sense for both Mom and Dad to work:
Reason #1: Protect Your Career
If the wife gives up her job, she could do irreparable damage to her career, because her colleagues (competitors?) who don’t take five years off continue to climb the corporate ladder.
Reason #2: The Lower-Earning Spouse Might Have The Health Insurance Benefits
That’s a very good reason to keep working.
Reason #3: Don’t Forget Retirement Benefits
Women in the U.S. typically retire with lower Social Security benefits than men, because women tend to work fewer years. Ditto for company pension plans; if you quit work for five years, you’ll pay the price later in the form of a sharply lower retirement income. So forget about the small loss today -- staying home with the kids can pose a huge economic loss later.
Reason #4: The Parent’s Mental Health
Some people just are not well-suited to stay home with their kids full-time. They need adult interaction. One of my clients, a working mom, had a job whose income was so low she actually spent $35 a week more, net of child-care expenses, than she earned. When I mentioned this to her, she replied, “Well, it’s cheaper than therapy!”
Reason #5: Improve your Child’s Development
A friend who has a little boy once told me, “If my wife were to quit her job and stay home with Billy, he would have a total social circle of one person -- his mommy. But in day care, he’s learning social skills by being around 20 other kids.” Point well taken: The value of interpersonal communication skills for a child shouldn’t be dismissed.
So, should you work or stay home? Clearly, it’s not an easy choice. Yet, more and more employers are offering flexibility that might help make it easier than before for both parents to work. Job sharing, flexible work schedules, and working from home are some of the options available in today’s workplace that you should explore as you try to resolve this issue.
My point is that you have a choice. Too many parents do not realize that options exist. Too often, parents assume they must work without considering the alternative. To be a success with your financial planning, you always must examine your options. And proper planning is perhaps nowhere more important than when it comes to raising your children.