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# Stay At Home or Pay for Daycare?

 by Jim Wang Email   Print

We’re getting to the age when our friends are starting to have kids and so the topic of daycare has come up on a number of occasions. As a couple with no kids, we haven’t done the research but we’ve always known intuitively that daycare was expensive. In doing some research for this article, I was amazed at how expensive daycare was. A whole year for an infant can run you \$18,000!

So in our modern age where you have two working parents, many couples have to decide whether they want to keep two incomes or drop down to one. If we were to make that decision, here is what I think we’d do in preparation.

## Daycare vs. Stay At Home

While the start of the decision making process may seem quite analytical, the decision itself is almost entirely emotional. The numbers may force your decision but more often than not, they won’t and you’ll be stuck deciding between the non-financial aspects.

So here’s the million dollar question – Should Mom or Dad continue to work and pay for daycare, or be a stay at home Mom or Dad? The answer lies first in the numbers.

## Cost of Daycare

For our analysis, I used the average weekly rate of the first three daycare facilities in our region on Google Maps that listed their rates online. The average rate, for five full days, was:

• Infant/Toddler: \$1,500
• Two Year Olds: \$1,200
• Three & Four Year Olds: \$1,100

## Breakeven Point between Daycare vs. Stay At Home

If you have one infant and are paying \$1,500 a month for daycare, that’s equal to a \$2,000 a month salary in the 25% tax bracket. If you earn less, you should become a stay at home parent because you are spending more on daycare than you are earning at your job. If you earn more, then you have to decide whether the difference is worth the time away from your child.

This analysis simplifies the math tremendously. First, it assumes a marginal tax rate of 25% which isn’t accurate if you’re a single parent earning \$24,000 a year (15% marginal tax bracket for the 2009 IRS tax brackets). Secondly, it ignores all deductions from income.

If you have two children, say an infant and a two year old, then the total cost is \$2,700 a month or \$3,600 salary if you’re in the 25% tax bracket. Again, the decision is still the same. Do you stay at home and save the \$3,600 or do you work and pocket the difference?

## Non-Financial Factors

Arguably the biggest considerations you have for this decision are the non-financial ones. To simplify it, in daycare, your child gets socialization with other children. At home, your child gets more attention from the parent who is staying at home. There are obviously other considerations but those are probably the biggest arguments for either choice and they’re clearly non-financial.

The problem is you can’t assign a dollar value to those factors. How important is it for your toddler to interact with other children his or her age? Is it more important for a toddler to spend time with a parent at home?

## The Decision

In the extreme cases, where you are earning less than the cost of daycare or where you are earning far in excess the cost of daycare, the financial aspects force a particular choice. It’s in those borderline areas, where the numbers don’t point to a clear answer, where the non-financial aspects used to decide. Like anything else in life, it’s not always about the money.

To the parents out there, if you went through this decision making process I would love to hear your thoughts about it. To the non-parents, is this something you’ve discussed? If so, what considerations have you talked about? I think a lot of people struggle with this decision and your insight would be invaluable.

(Photo: eugeniajulian)

### 85 Responses to “Stay At Home or Pay for Daycare?”

1. nickel says:

My wife stays at home and it would be hard to imagine doing it any other way. We have four kids, so the daycare costs would eat up the majority of our extra earnings if my wife worked outside the home. Beyond this, our life is exhausting enough without a second parent working. I can only imagine how much more difficult things would be if we both had to work. Fortunately, we’re in a financial position where we don’t have to do that.

Also, a minor point… You presented the non-financial factors as if kids who don’t go to daycare don’t get socialized, but that’s simply not the case. Sure, daycare comes with “built in” socialization, but our kids have gotten plenty of interaction with others as they’ve grown up.

• Jim says:

With four it’s a no brainer from a financial standpoint. As for socialization, I didn’t mean to imply that they wouldn’t otherwise get socialization.

• Karrie King says:

I have to agree with your point on kids and particularly babies, needing to be around other people besides 1 parent, Jim. My son is going on 4 months old and is my first. He has an older brother who we see every other weekend and some holidays but my son screams if anyone, other than I picks him up, longer than 2 minutes. He literally cries like he has colic and many people ask me if he does that all the time but as soon as I have him he stops crying. He even does this with my husband if he works late and comes home and doesn’t spend much time with him! He definitely needs to get out with a playgroup or something!

• J's Mom says:

4 months old and having that reaction could actually be a few different things. Dr. Sears has some interesting things to say and strategies for dealing with different attachment patterns that I found very helpful. Also, though, I find that kids who react that strongly at such a young age can be doing so because they aren’t feeling their best and really need the comfort. If it doesn’t go away after month 6 or 7 and you’ve tried some of Dr. Sears’s or other behavioral methods, I’d actually consult a pediatrician before trying a playgroup. When they’re that young, playgroup isn’t usually what they find comforting. Just my two cents!

2. My wife and I are rather fortunate. Our friends / neighbors have a daughter about the same age as ours and we’ve worked out “baby-sharing” that avoids daycare but allows my wife to work part-time.

It’s a good situation but I don’t think all friends are up for the challenge.

• Jim says:

Babysharing is an awesome term and a clever idea.

3. Abby says:

We’ve tried (almost) everything. I’ve been a stay-at-home parent, work-part-time-from-home-parent and now I (once again) work full time outside of the home. My husband has always worked full-time outside the home – we’ve considered other options, but none have made sense.

When I decided to go back to work I had a 6 month old and a 4 year old. Our childcare costs are slightly lower than the national average, and my salary is significantly higher.

The other part of the equation that you don’t mention is future career decisions. The job I returned to is far less demanding than my pre-child one. The hours are predictable, flexible and I work just a few blocks from home. My children are in a center across the street from my office – and will eventually attend the adjacent elementary school.

But because I’m working, my husband can now look for a less demanding job, too. We decided it was better for us to both work, but both have ample free time and flexibility to meet the needs of our family.

Two other considerations that complicate the financial analysis. First, I’m lucky enough to have an employer match on my retirement savings. And my employer is FAR more generous with benefits. We’ve cut our monthly deductions for health insurance by more than \$100/month, while increasing our coverage.

It’s not the right choice for everyone, and quality childcare can be difficult to find. But we’ve learned that it isn’t as easy as work-at-home/stay-at-home. There are plenty of options in between.

• Jim says:

I felt future career decisions was a little outside the scope of the article, which is why I skipped it, but you bring up excellent points about there being plenty of options in between.

4. Miranda says:

Even though I’m a WAHM, we used babysitting a couple days a week before my son was old enough to go to school. Since he’s an only child, we thought it was good for him to play with other children, and I needed an occasional break in which to be more productive. We were quite fortunate to have the flexibility and the means to choose the amount of daycare my son received, which was only about 9 – 12 hours a week.

5. Patrick says:

I am not a parent yet, but I have friends who send their kids to daycare and say how expensive it can be. My brother has has a few children and his wife stays at home just because they could never afford to send them all to daycare. I’m not looking forward to this expense when I have kids.

6. The financial analysis should also take into account the financial benefits of working (as Abby mentions) such as insurance, 401(k) matching, etc. Some of those things can add up pretty quickly. Also, you can pay for some day care costs with pre-tax money, although that doesn’t stretch very far.

Also, it is quite likely that your skills will atrophy a bit during your absence, so it will be harder to get back on the same career path you were on earlier. I’m not saying your employer will discriminate against you because of your absence (that’s an entirely different, and completely valid, discussion) – but simply that you will have lost the opportunity maintain and enhance your skills.

This is paricularly relevant in technology oriented jobs. I can’t imagine going into today’s job market with the skills I had 5 years ago – many of which are now worthless.

You can mitigate this by making a concernted effort to keep your skills up-to-date, of course. And you might simply decided that it is worth the sacrifice.

Day care here (Iowa) is “only” about \$800/child.

7. Alex says:

We have 18 months old child. We pay \$1000 for the daycare in upstate NY. We both work and my spouse’s salary is merely covering the daycare. So we live on my salary (close to \$50K). We tried to be stay-at-home parents but neither of us can deal with it easily. It does not help in our marital relations. So we decided to both work and happily spend time with our child after daycare (still a couple of hours) and weekends. So we sure she gets enough love form us over the time, but she also gets playing with children of her age which is very important.

• Jim says:

I imagine it’s hard to be a stay at home mom/dad. It’s hard not having that human contact or intellectual stimulation that comes from working.

8. Rob O. says:

There are lots of subtle components in that “socialization” factor that shouldn’t casually dismissed. It’s important to note that daycares now aren’t babysitting services – most have evolved into well-organized school-like learning environments that feed children’s sponge-like brains by the bucketloads.

Children in a daycare setting learn to interact, share, cooperate, squabble, and settle disputes. The advantages of this group dynamic can be major! Several of our coworkers’ kids that my son plays with are kept at home and they don’t understand how to play well with others or share. Home-kept children’s language skills sometimes lag well behind too. I believe the daycare experience better equips kids to deal with the social dynamics that they’ll encounter in public school.

Kids in daycares also come into contact with a multitude of germs & minor “bugs.” This is a good thing! Early exposure helps the developing immune system adapt for the bigger challenges that’ll come later in childhood, adolescence, and adulthood.

• Jim says:

I think it’s hard to argue that you can get the same level of socialization at home that you do at a well-run daycare. However, it does come down to a financial tradeoff. Do you pay for daycare with heightened socialization, or do you skip it and save money for other things? For some families it’s not even a decision.

I didn’t even think of the germ part, I think early exposure to germs is good because it boosts your immune system.

• Ln says:

First off, let me say that I have many points to make to you, but I will list them under each of your replies to make referencing easier.

You state that “It’s important to note that daycares now aren’t babysitting services – most have evolved into well-organized school-like learning environments that feed children’s sponge-like brains by the bucketloads.” While I agree with this to an extent, to say that “most” are this way is naieve of you. Many people across the country still live in areas where daycare is still exactly babysitting. In these cases, the decision for staying home may well be wiser for them.

In addition, not all “socialization” is worthy of praise in a school or daycare setting. Children pick up negative with the positive, and again you have to weigh that into your decsion making process. The things my daughter has picked up and came home to ask me about is astounding. (gasping as I relive some of these thing!)

As far kids picking up germs and “minor bugs”, again, this is not fact. Or if it is, then you have to also look at the research saying it just isn’t so. All of the pediatricians at my children’s doctor’s office, chose not to send their children to school until 3K (part time) and 4K(part time or full time). For those reading this that may be looking at them picking up bugs as a good way to build up their child’s immune system need to remember that with each of these “sicknesses” comes a lot of missed work on your part. Daycares will and do call you to come get your child if anything is amis. They have to, to protect the other children from these so called “bugs that can build up their immune system.” It’s hard to miss a lot of work regardless of how understanding your boss is. I had a very understanding boss (the principal), and generally an understanding field (teaching) to be in when it comes to staying home with a sick child. But that didn’t stop me from worrying about letting my sweet babies at school down, or stressing about how much isn’t getting done with them, or how their parents are feeling about me being out again.

Last thing, going to daycare is not the only socialization children can get. There are many other ways, one being just having siblings. Anyone with multiple children know that learning to share, squabble, settle disputes, and cooperate are a GREAT BIG GIANT part of having more than one. I think if you had more you would understand this a lot better! Whew. That was a mouth full. Now on to more comments!

• Ln says:

Let me just say one other thing…I apologize for all of the typing errors in this post and subsequent posts. I was trying to type very quickly to get finished before my two sick boys woke up from naps. When I finished them all, I reread them and ugh…sorry. And I’m not really sure how I even ended up on this website. One minute I was reading about coupons and groceries making this week’s grocery list, I clicked on a link, then another, and voila! Here I am.

• Aaron says:

I believe most of what you argue would depend on the person that is watching them for the “stay at home part.” My daughter has perfect manners that my wife taught her. She shares better than all of the daycare kids she’s come into contact with.

You should also remember that it is harder to enforce discipline with 3 parents (or more, you, spouse + countless others who are watching at the daycare). It requires much more communication to keep up with what the daycare is teaching. There’s also the fact that your child will be exposed to children who do not have good parents at home, and you will have to combat the bad habits they pick up from the other kids at the daycare (language, hitting, biting, etc)

9. chapstickmeg says:

We don’t have kids yet, but my husband and I will probably choose to put our kids in daycare part-time so I can stay current in my field. We are lucky that my husband’s employer has an on-site daycare, so it would be convenient for us and the cost would be fairly minimal. Still, my earnings would probably just cover daycare costs with maybe a little bit left over. That’s a trade-off we’re willing to make, however, since a few years out of the workforce would cost us more in the long run than a few years sending most of my salary to child care.

Socialization and exposure to other kids isn’t a factor we are considering at all—for us, it’s all about future career prospects.

10. Lynn says:

Just 2 things regarding the financial aspect. Once you have 2 children, there is usually a discount (for me its 10%). Also, if you have a child care taxed advantage account at work that will cut down on the taxes paid (you can put up to 5K in the account)…or you can take a tax deduction of at least 20% of \$3000 (and depending on salary could be even more) per child on your tax return. If you have 2 children for example, you can use the child care account for the first \$5K and then used the tax deduction on the tax return for the next \$1K.

I have 2 1/2 year old twins in daycare part time (3 days a week). They just started the pre-school portion of daycare this week after being in the toddler component for the last year. Yes, they are sick more often but the amount that they have learned is incredible. They go to a Bright Horizons center that follows a curriculum. Yesterday they made volcanos with vinegar and baking soda and I was shocked. That is not something I would ever think of doing with my children at their age. They loved it and I am so thrilled they are learning so much.

11. Jessica says:

I’m shocked at how high the numbers you and others are quoting for day care. I suppose the living expenses and therefore daycare expenses are just that much lower here in Fort Worth, TX. Several of our friends pay \$150/week for top of the line infant daycare that has a learning curriculum and everything.

• Jim says:

The cost of living in the Washington DC-Baltimore area is fairly high. I don’t know how it compares to Fort Worth but I pulled the data from the daycare website just recently so they’re pretty accurate. \$150 a week would be a dream for my friends.

12. Matt SF says:

It may seem like pie in the sky, but I’ve known several colleagues to screen their future employers for free (or subsidized) daycare facilities on or near the job site.

It may seem like a picky detail in a recession, but if you’re a top performer with a skill set in high demand, a top tier company will still foot the bill to get you on the payroll.

13. FFB says:

We’re one income at the moment. My wife returned to work and I’m taking time off using the FMLA. It’s very important for us to have a parent take care of the kids. My wife took over a year off to care for our son. We only recently switched due to financial concerns (after my FMLA time is up we’ll most likely use daycare).

If you can afford to not use daycare then I say do it. Yes, your child gets some socialization but it’s not always that much and you can always enroll your child in a short program a couple of hours a week or attend library time or go to the park to socialize your child.

As for getting your child exposed to germs early on – there’s no benefit to having your child sick every other week and having to call in sick at work to take care of them. You might as well stay home. And I’m not exaggerating either. Our son caught a type of cold virus that stayed with him for months. Not fun!

And then there’s waking up extra early to get the kids to daycare and dealing with them not wanting to go in the cold winter and crying when you leave them. And also coming home from work to prepare everything for the next day.

Oh, and you child is being raised by a virtual stranger who is also taking of other kids. Your child will not be getting the attention they want.

I’m not against daycare. For some it’s a necessity. But if you can save up and plan to have one spouse stay at home then I think that may very well a better decision for you children. We’ve cut back some so my wife was able to stay home but our quality of life went up a huge degree! It will be heart-breaking for us when my leave comes to an end. We’ll have to think long and hard on what to do next.

This is an individual decision that has no “right” answer. Each family has different circumstances and they will have to weigh all of the costs and benefits.

Thanks for opening up this discussion!

14. Jim, if your numbers are right, the cost of daycare has more than doubled in the past 10 years! (Or maybe it’s less expensive where I live)

There is one “soft factor” to be aware of with daycares–they will call you if ANYTHING goes wrong! Diharrea, take the kid home, pink eye, take the kids home, fever, take the kid home.

These are all common issues with babies and toddlers, but the daycares can’t deal with them, not with 10-15 other kids in the room, and only one or two attendants per room.

After a few months of being called for these ordinary “problems” you really begin to question if it’s worth it. You end up home with your child every time their “sick” as defined by the daycare.

It doesn’t get better as they get older, because behavior issues enter the equation, and they don’t like those any better.

It’s best if you can avoid using daycare. Not easy if you have a high level career and the kids are very young, but there’s no perfect solution to juggling kids and a career, not even work at home. It often is a choice of one or the other.

• FFB says:

Yes! For us it was getting to the point where my wife was going to be docked for taking sick days. If she’s getting docked then it’s so not worth it!

And let me add, in the time off my wife had she was so much more relaxed and we enjoyed our time together as a family much more. With work and daycare we tended to do all of our errands and chores on the weekends with less time for family fun.

15. thomas says:

what a timely article. We are currently talking about this stuff now with our family planning. Your numbers seem about right. For us, the costs are almost equal, meaning we have to “find” \$1200-1500 a month to either make up income or pay for day care.

16. Stay at Home Mom says:

Ask a home school parent about “socialization” and you will likely get an earful!

I have read several articles about kids and colds, and exposing them to more germs/viruses isn’t scientifically proven to be beneficial. In many cases it weakens a child’s immune system to be sick too often. I would encourage readers to research this.

As far as money goes, I haven’t seen any mention of all the money I *save* my family by staying home. I cook more from scratch, I have few dry-cleaning bills, I garden, I sew, I clean my own house, etc. There are a lot of frugal activities I would have to forgo if I had a job outside the home, not to mention the things I would have to pay extra for someone else to do for me. And my kids are usually right there alongside learning about all these real-life skills first hand, which I think is as good as any learning curriculum in a daycare.

17. dilbert69 says:

Don’t forget that many employers offer a FSA that allows you to set aside \$5K free of tax to pay for dependent care expenses. I believe both adults have to be employed for you to qualify, but you don’t have to be married.

18. dilbert69 says:

I’m not a parent, but I think many parents overestimate the quality of the childcare they provide versus that which would be provided by a child care worker. Many people are, frankly, not very good parents, but of course no one will admit to this, any more than anyone will admit to being a below-average driver. My mother put me in daycare in the mid-60s, when it was much less common than it is today, and I’m very thankful for it, as she was a terrible parent. I loved her, and I miss her now that she’s gone, but she had way too many personal demons to be any good at parenting. None of this is her fault, but it’s true nonetheless. My behavior problems increased when my mother stopped working and started spending more time with me.

Also, compared to complex securities litigation or cardio-thoracic surgery, childcare is pretty easy, which is why we relegate it to low-paid workers. Bill Maher caught a little flack by suggesting that the head of the FBI maybe should have been running the FBI instead of on paternity leave, as protecting the country from criminals is more important than being a good dad. One could argue that someone with such a hard job shouldn’t have children at all, but the idea that spending time with your kids is more important than even the most important job is pretty selfish and irrational, IMNSHO.

19. Rob O. says:

I line with what Dilbert69 said, I’d hazard a guess that the parents represented here are well above the norm.

Far too many stay-at-home parents (SAHP) are not especially involved, progressive, or even necessarily capable. Much of the time, SAHPs end up being little more than babysitters and certainly don’t expose their children to the steady stream of learning opportunities that quality daycares do.

Heck, even as much as we try to be engaging and stimulating, I’ve noticed my toddler craving the daycare’s structure and interaction after a few days at home (like during holidays, for example). Of course, this is going to vary with each child and some, like ours, are more socially-inclined and may respond especially well to the daycare setting.

Mind you, I’m not suggesting that SAHP are in the wrong – this is very much a choice that has to be made for each family’s unique situation.

• Ln says:

As I stated earlier above, my daughter craved the interaction with others for a time, but then craved all the attention she was getting with me. She started to realize that if I’m not in school, I can go to the zoo, the park, have a picnic, go to the children’s museum, etc. with my mother. I’m sure if you stayed home you would provide the same opportunities to your son and he would LOVE it. I know that many homes don’t provide what you and I would for children staying at home, but don’t be fooled into thinking that most daycares are exposing them to more. Many daycares fall into the same pitfalls that parents that stay at home do. It’s hard to be around children all day. I’m sure like everyone, stay at home parents and daycares have their great days and their less than stellar days.

All of my children are more socially inclined as your son is, but boy they relish all the time they have with their parents more. My son will pick fishing with dad over playing at school or on a playdate anyday. My daughter would choose a girls’ day out with me over a slumber party with her friends. And I’m so pleased that they have their priorities of family first in order.

• J's Mom says:

I think it really depends on the age of the child. When a kid is old enough for preschool, then, indeed, factors beyond the financial become a big factor. We’re financially very conservative, and I had to weigh the options of spending money and gas on a home school environment and field trips vs. paying for a little preschool per week. This, however, only became a factor when he was old enough for regular household education and library materials to cease to be enough for him. Certainly, not all parents are teachers or nurturers. There are many SAHPs who go into at-home-parenting with the education/mental stimulation aspect in mind. If you aren’t a very structured person naturally, daycare/preschool can be a lifesaver.

BTW- have you noticed that there are preschool (for kids who can’t read yet) workbooks with answer keys in the back? It boggles the mind….

20. J says:

Also, remember that nearly 1 in 10 families in the US are single-parent families and as such, don’t have the option of staying home with their children.

• Christy says:

I was wondering if anyone was going to mention single parents. What do you do when there is only one parent trying to pay for full time infant daycare?

• Single Mom says:

I had to leave my job and go on unemployment, when I became a single mom, because of the cost of care. As an office manager, I couldn’t work and afford an apartment and food at the same time. But I couldn’t qualify for goverment assistance either because I made just \$2.00 too much an hour. I am trying to find a higher paying job and am on the waiting list for discounted child care but until I get either I can’t work. It’s really hard on you mentally to not be able to provide for your child.

21. Kelly says:

I have so much to say on this subject that I’m turning it into a blog post.

So many things were missed in the article (I know it was meant to be a brief look at a complex issue), and the comments included some arguments and points I want to address.

22. NCN says:

We have three kids. We have used the same local day care for all three of them. We love our daycare provider, she’s like a member of our family. Her house is immaculate, her rates are very reasonable, and when the kids turn 3, she begins to teach them to read and write. Our two oldest are now in school, and have REALLY benefited from the work she did w/ them. If we were in the financial position for my wife to stay home, she might, but we have been so blessed with good care, we haven’t had to think about making that decision.
BTW – As proof of how good her care is, our middle child, now in school, still rides the bus to her house each day, just to stay for an hour or so, because he likes her so much.

23. Kay says:

Not a parent, but as a tax geek I’ve got to say that if you use daycare and your workplace has a dependent care flexible spending account, take advantage of it. From from parents tell me, it won’t cover nearly enough of the costs, but every bit helps! Especially when you use untaxed money!

24. jim says:

Jim’s numbers are at the high end since D.C. is one of the most expensive places. Nationally theres a huge range in prices and it could be as low as \$5k a year in some places and as high as \$15k in others.

• thomas says:

\$5k a year for childcare? I would be frightened to see what \$100 a week would provide my child.

• Kelsea says:

Actually you would be suprised at what my 115\$ a week daycare provides for my child. I live in Texas so it is cheaper than elsewhere but my son goes to a very very good daycare.

As a stay-at-home dad, I can attest to the challenge presented by the lack of social and intellectual stimulation. No small wonder that housewives decades ago resorted to imbibing martinis and pills.

Another challenging aspect of stay-at-home-parenting is the effect on the esteem of the individual, as one may feel that one is not making a significant contribution in the form of income.

• momtofour says:

This is probably due to the fact that you are a man. Typically, men are not at home with the children, although I do find the rising trend refreshing. Men are the “breadwiners” and usually do not feel fulfilled with being at home with the kids.

• J's Mom says:

I’m definitely not a man, but I’ve often felt the same way. It’s hard to see the financial contribution of the work one does at home a lot of the time.

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