Work or Stay Home With the Children? A Financial Perspective

Deciding whether one or both parents should work is never easy. There’s not a single approach that will work well for all families.

There are many potential cost savings that can be gained by a parent staying home to care for the children. On the other hand, there is also a loss of income. Analyzing the details for your own situation is your best bet.

Sometimes couples have more options when one spouse has a significantly higher paying job or more work flexibility than the other. Many people believe that nearly any couple can afford to live on a single income, because childcare and other expenses linked to work usually use all of the second income. But this isn’t always the case.

Let’s take a look at some numbers associated with one spouse staying home:

  • Child care savings. $600 to over $1,000 per month for childcare is not an insignificant amount.

  • Wardrobe savings. Most of us need clothes for work that cannot be satisfied by the clothes we typically wear at home. Remember dry cleaning costs as well.

  • Commuting savings. You might only need one car instead of two. Even if you keep two cars, the cost associated with gasoline, tires, maintenance, and more will be greatly reduced.

  • Food savings. If you stop going out to eat, you can save a bundle. If a spouse stays home, that can cut down on lunch costs and the morning stops at those expensive coffee places.

  • Home-based income. Maybe one parent can telecommute part-time. There is also the opportunity to start a home-based business that could result in significant income. This item might require part-time day care, nursery school, or simply waiting until the child is old enough to start regular school.

  • Frugality. If you use this opportunity to overhaul your entire way of life, you might save a bunch more through simple living. A lifestyle that highlights frugality can be a wonderfully simple and meaningful way to live.

When It Might Make Sense to Keep On Working

  1. You’re already frugal. If you’re already a penny pincher, your main savings when moving to a single income will be childcare.

  2. Mortgage qualification. A second income can make it easier to qualify for a mortgage. But be careful, if you can’t qualify with the one income, you might be on thin ice if you ever decide – whether by choice or necessity – to live only on one income.

  3. Retirement Income. You can miss out on a lot of retirement savings and 401(k) contributions by staying home.

  4. Future ability to be employed. Is your current career important to each of you? Dropping out of the workforce can stop your career cold. Consider where you would be likely to be in 10 years if you continued working. You might not even be able to start at the same level you left.

  5. Divorce. The divorce rate means it’s more than likely that you’ll be a single parent at some point. Having your own household is obviously more expensive than living with someone else. Sadly, most couples don’t grow old together. So consider the ramifications a divorce would have on the financial situations of everyone involved.

One parent staying home with the children can be wonderful for the kids. It can also be a financially reasonable solution, depending on the specifics.

Consider the long-term impact and decide if it’s the right move for your family’s situation.

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