Stay At Home or Pay for Daycare?

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Dancing in DaycareWe’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 comments, please add your thoughts now! }

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

  1. Jeremy says:

    Man, I sure am glad we live in a low cost of living area. We only pay $100/week for daycare for our 6 month old.

  2. Maria says:

    Abby hit the nail on the head: there are *far* more financial considerations than “does daycare cost more or less than I earn.” Benefits, Social Security, atrophy of job skills, future wages, and social capital are huge costs for taking five years off.

    The best approach I’ve seen was by a colleague of mine: she worked four days a week (Monday through Thursday), as did her husband (Tuesday through Friday). She worked early in the day, and he worked later in the day. As a result, their two girls were in daycare only three days a week, and for only four hours per day, most of which was spent napping.

    They got the best of all possible worlds: quality daycare and socialization, quality time with Mom, and quality time with Dad. Both parents kept their skills honed and had meaningful adult interactions during the day. Though our team had to adjust to her absence on Fridays, it wasn’t a difficult change for us. And though one might expect the staggered schedules to have caused marital strife, their marriage is one of the strongest I’ve seen.

  3. Anthony says:

    I am currently in a similiar position as Jim’s friends. My wife and I are expecting. The discussion of day-care vs. stay-at-home has come up numerous times.

    Unfortunately, if she did not work, that would be a HUGE financial hit on us, and therefore, day-care is a must. At any rate, it’s “only” $115 a week for us, and we will probably only use the day-care service for about 35 of the 52 weeks in the year. My wife is a teacher and has the summer off, so that has also been taken into account.

  4. Trish says:

    For me, it was more about raising my son the way I wanted him to be raised. I didn’t see the point in having a child only to have him spend most of his waking hours with strangers. I’ve done both stay at home and work using after school care, the latter was due to financial constraints because my 2 stepsons were in college at the same time. As soon as they graduated, I went back to being a stay at home parent. Now that he’s older and doesn’t need my full attention, I’ve since started a part time online business from home.

    I did send my son to preschool when he was 4 three mornings per week just to help him get acclimated to the structure of a school day. Knowing that daycare staff around here are paid basically minimum wage and have virtually no training, I wasn’t interested in having that type of care for my son.

    As for socialization, that’s what friends are for.

    I wanted a child, I had a child, I wanted to raise my child myself. There was plenty of time for him to be away from me in school once he was old enough to go.

    Yes, we had to make lots of lifestyle adjustments to accomplish this, but it was WELL worth it for our family.

  5. BRB says:

    I’ve known people who work 40+ hours a week at a job they don’t like so that they can make $100 or so a week extra after childcare. I’ve never liked any job enough to be more interested in working for a few extra dollars rather than work less and do a little less.

  6. Dave says:

    My wife and I have had this discussion, and right now it is cheaper for daycare than it is for her to quit working. If we have a second child, we’ll re-evaluate the numbers.

    As much as my wife would love to stay home with our daughter, I don’t think it would be a good idea. I see how my daughter interacts with the other kids at her daycare (she’s only 8 months old) and its incredible. She’s almost a completely different person when she’s at home. She’s much more outgoing and laughs and plays and climbs much more when at daycare than when she’s home. To me, this is more important than the money, because I want her to get as much exposure to the world around her as possible, and I don’t think she’d get that at home.

    • Rob O. says:

      We’re in a fairly unique situation – my wife & I tried for a very long time to have children on our own, and we had every reason to expect that we’d be able to do so. So, from the start, we began making lifestyle adjustments and paying down/off debts to accommodate that choice.

      So, by the time (years later) we gave up on having our own and began pursuing adoption, we were in a position that few new parents can be in – our house & cars are fully paid off. The only real debt we have are monthly expenses types of bills.

      For nearly a decade, we did some very aggressive debt reduction & savings specifically so that my wife could be a SAHM. But then our son came along…

      Perhaps because he came from an orphanage, he thrives in the regimented, social daycare environment. Much like Dave said, our son lives to interact with other kids. We’ve discussed this at some length and believe there’d be a real negative impact if we removed him from the group dynamic that suits him so well.

      I do feel a bit guilty that we went to such lengths to become parents and then only get about 3-4 hours per day to be with him but I’d feel even worse if I sacrificed his well-being or happiness just to ease my guilt.

      By the way, the cost of daycare is quite relative… In Texas, the COLA is comparably very low. We pay just a bit over $110 per week for full-time high-quality daycare. (And it’s only about 3 blocks from work, so we’re never far if problems arise!) But it’s also worth mentioning that we got on the waiting list for this daycare 2 years before we ever even met our son!

      • Ln says:

        I truly feel that if you or your wife did one day decide to stay home with your son, that he would adjust quite nicely. Obviously, it wouldn’t be automatic, but it would occur. Not to mention, that YOU would get to choose who he socialized with, what he learns, and he would get to go on “field trips” (that’s what we call them when we go some place together), which is not something that children in daycare get to take advantage of very often. Think of all the things he could be missing by not staying home with him. I often think that if my sons had been in daycare since day one, they would have missed so many of the things that I have been able to give them that a daycare could not. Don’t sell yourself short on what he wouldn’t get if he was with one of you all day. Think of what he would be getting that he wouldn’t otherwise get.

        I have a teacher friend whose daughter graduated high school a couple of years ago and she worked while her daughter was little for the exact same reasons as you…her daughter craved the child interaction. But she and her daughter both say they wish a different decision had been made. The mother missed out on a lot of things she could have been doing with her daughter and her daughter says she was jealous of children whose moms did not work because they were around all the time.

        This may not work in your situation and the way you have it set up for your family, but I just want you to remember, and even more, other people reading this still trying to decide to remember, that their is a lot more than just the socialization of a child.

        I feel so sad for parents who don’t have the choice at all one way or the other. It’s so wonderful to even have the chance to weigh all the options and decide rather than having it made for you.

        And to Dave, wouldn’t it be as wonderful to see how your daughter interacts with your wife as much as it is to see her with other children? I’m sure it is. Not to mention, a happier mother will translate into a happier wife and in turn, a happier family.

  7. Shock says:

    This debate is fresh in my family’s mind because we just had our first kid 3 months ago. My wife’s decision to be a SAHM was an easy one for us. I am a technical professional, so I make a good salary. My wife’s job wasn’t a career job, so it was an easy decision to quit after maternity leave. Here salary was just enough to pay for daycare, so it wasn’t worth keeping. She’s still in school, studying to be a school teacher. She’ll return to the workforce as a teacher when our kid(s) go to school so we won’t have the need for daycare and she’ll share a similar schedule with our kid(s). We also made cutting our expenses a fun game. We evaluated our lifestyle and trimmed everywhere we could. I sold my beloved convertible sports car (I still miss it but it saved us a ton of money), cancelled cable TV service and trimmed our cellphone service to name three. When we ran out of expenses to trim, we were both sad because our game ended. It was fun while it lasted. Then our son was born and our new family adventure began. We are able to live on one salary. We are a proud one car family. My wife joined multiple mom’s groups which gives her the adult interaction and play groups for our son. We are happy with our decision.

    • Shock says:

      I forgot to mention that my wife took off 2 semesters to have our kid. She’ll return in the spring. She’ll go part-time. Most of her classes are during the day, so we’ll need some babysitting, but we’ve got a friend in a similar situation and we’re working out babysharing.

  8. Wizard Prang says:

    I have nothing against daycare, but I am amazed when people adopt a lifestyle what requires two incomes before deciding to have children.

    I also question the wisdom of having kids and then paying someone else to raise them – particularly in the pre-school years – but coming from one who has none, I freely admit that this is a bit like a legless man giving advice on running 🙂

    It’s a complex equation; the value of one parent at home is more than just daycare. Sometimes it’s a good idea, sometimes not.

    Once they are at school, however, it’s a different story. After my parents split, my Mother raised my brother and I by herself; she could have stayed home and claimed welfare, but she made the hard choice – and in doing so, taught my brother and I a good work ethic by example. That has not be mentioned, and cannot be underestimated.

  9. Emily Lauren says:

    I’m surprised that you didn’t have non-financial reasons for the -parents-, as well.

    I’m childless, but I think a contributing factor for me is my -own- socialization and professional/intellectual development. I can imagine that after staying home with the kids each and every day would have me wanting intelligent, adult interactions.

  10. Greg says:

    Hello Jim,
    I have two kids and i did have to make a decision on what to do. Money was tight and this was a hard decision. Im a little old fashion and wanted my kids to be raised at home with mom. I sacraficed and decided to work two jobs and work weekends as well. This worked out for a while until i burnt out and couldnt do it anymore. At that point my wife did get a job and we put our children in daycare. We made enough to get by and it worked out for our kids as far as liking the daycare situation. We are since past the days of daycare but i do feel for the young parents who have to deal with this situation. Its not easy, but then again being a parent is the hardest job you will ever have. Good luck to all parents!

  11. Laura says:

    Great article… I have seen families go through this debate. I work in the special needs field and have been this debate complicated by children with developmental disabilities and trying to balance the need to pay for therapy for their child and be with their child as well.

  12. Hank says:

    Maybe another option would be to take a few kids into your home to watch…sort of becoming your own daycare. It would be a great way to pick up a little extra money from watching one or two extra kids. You’ve got to watch your own, what’s a couple more going to matter?

  13. It’s my experience that the money is the least important of the factors in making this decision. It is a huge, huge switch to become a stay-at-home parent, and not many people are really hard wired to do it well and enjoy it. In many cases, some combination of working, day care or a nanny, and some time at home is probably better for the child and the parent. Money should factor into your decision, but it cannot be the first factor, in my experience.

  14. Joetaxpayer says:

    For us, the right thing was to hire a nanny that came during the day.
    We were fortunate to be able to afford this, although it was a big chunk of our income. My wife and I split the house chores and were able to stay with our daughter the rest of the day, so we felt we actually had more time than even if one of us stayed home.
    Not critical of the other choices, it’s a tough choice for all of us.

  15. Kymm says:

    I was a single mom making $20,000 a year and was able to pay for full time child care with the help of my child support. I earn the equivilent of 3 weeks off a year, when my son was in day care I used every single day off for when he was sick.

    I am now married and we are having the debate, do I continue to work and then have to pay for full time infant care, before and after school care for my son and summer camp for my son which equals about $13,500/year. With the economy going south, I took a 10% paycut so I’ll be earning about $5,000/year after we pay for daycare. That leaves about $400 a month…is $400 a month worth it? We’re trying to decide but I’m leaning towards being a SAHM. I’d be able to cut costs by living more frugal (no eating out, line drying clothes, etc) and I’d also have the time to enjoy myself. Something that doesn’t happen a lot when I work 40+hours in a week, cook, clean, take my son to activities then still help my disabled mother, see family and friends, and try to spend time with my hubby and son.

  16. Rob O. says:

    Please understand that I’m still not suggesting that it’s the wrong decision to make, but people would be wise to also consider the hidden costs associated with Stay-at-home parenting.

    You’ll undoubtedly increase your utility costs because there’ll be 2 or more people at home ALL day, EVERY day to using heating & cooling, burning lights, running water, etc. You’ll probably also spend more at, or make more frequent trips to, the grocery store – although this is likely offset by not eating out for lunch, which most working parents do.

    And though this is probably the case already for most families, having one parent staying at home almost certainly means that you must have 2 cars and you’re likely to spend more on gas and upkeep. (Many families we know get by with just a single car since both parents work either at the same business or at very nearby locations.)

    These may be trivial expenses when compared to the cost of daycare, but it’s still worth factoring those things into your decision-making process. Staying at home doesn’t come for free either…

    • Ln says:

      We have more money now that I stay home than when both of us worked. And that’s with the increased power bill, water bill, etc. As far as gas, I would venture to guess that most people are not like you and your friends where spouses work so closely together, making the gas bill a moot point. Even with me driving to the library, the park, the museum, the zoo, my daughter’s school, visiting grandma, etc. I still use about the same amount of gas as I did driving to drop my daughter off, going to work, driving to pick her up, and then to home. And if my family needed to spend less on gas, then we just wouldn’t go to so many places, effectively spending less gas than when I worked. One reason some stay at home families really do spend less money is that once you know there is one income, you go to great lengths to protect it and stretch it and save it and use it only on things that are necessary. You become very resourceful on how to save money, much the same way a person trying to get out of debt would. This is a great lesson for children to learn. And it’s much easier to learn if it’s being practiced in the home. Which, in your home it seems that it is because your family is debt free.

      And you’re right. Staying at home doesn’t always mean free, but it could be more free than working. (especially when your kids aren’t getting sick all the time and you’re having to pay for doctor’s visits and prescriptions…we spent over $500 on doctor’s visits and prescriptions the winter my daughter was in 4K from all the things she picked up and brought home to her brother, mom, and dad. If she had been home, we likely would have spent less.) Just more to consider for people still trying to decide.

    • J's Mom says:

      Not eating out as much is the major non-day care related expense that we’ve encountered. It really is amazing how much you save when you aren’t paying for two people to eat two meals a day out of the house! The water bill is actually the bill most affected by my choice to stay home, but choosing to do laundry and dishes at night has kept the electric bill level.

  17. kikisgram says:

    i am currently caring for and homeschooling my fourth granddaughter (and lovin every minute of it) to help one son with childcare expenses. 40 years ago i was a single parent and paying over $l20 a month for child care. with the arrival of a second son, the cost went up to l80 a month. hard to do on a single mom’s salary. i wouldn’t have changed a thing. i have two fine sons and we have wonderful memories of time spent apart and together. its a personal choice, but i really didn’t have any choices – two divorces, two sons, and no child support, i had to be the one to work. i was really blessed.

    • Andrew says:

      Don’t you mean “hard to do on _my_ salary at the time”? After all, some single moms make earn high salaries.

  18. eric says:

    Ridiculous how much daycare costs.

  19. Mike says:

    Wow, what a great discussion.

    I have a couple of points to add – my wife stays at home (her

    choice) with our 18 months and 3 yr old and the jury is

    definitely still out on whether it’s working.

    1) In your analysis you conclude that if the net income is more

    than the cost of daycare then it’s worthwhile to stay home. I

    think you should also include the situatino where the net income

    is only a bit more than daycare cost. In that case the person

    will be working for a very, very low wage. As was mentioned in

    the comments, future income will definitely take a hit although

    that is very hard to calculate.

    2) Socialization is definitely an issue. Sure the stay at home

    parent can find other kids for play dates but will they make the

    effort on a regular basis? What if you have two kids and 1 is

    very young – that makes it very hard to do proper activities

    with the older child. What if (like my wife) you have an aging

    parent who also needs some help (getting to appointments etc).

    3) Just because you have a stay-at-home parent doesn’t mean

    there will be no child care costs – we pay about $1000 per month

    for a part-time mother’s helper/babysitter. Yes, this is a

    luxury but we do it. I know quite a few people who hire some

    sort of help even if they aren’t working at all.

    4) There is a lot less hassle with a sahp so I don’t have to leave early to drop anyone off at daycare and dinner is ready when I get home. Diet is a big beneficiary of this arrangement – if we were both working then I can guarantee that we would be getting take-out a lot more than we do.

  20. sokalady says:

    Been there; done that. Both ways. I did learn that there are merits to both decisions. Unfortunately, children do NOT come with care and training instructions. In fact, none of us are born with instintive parenting skills. They are ALL learned, just like language and other skills. That is why parenting is the most difficult and most important job. NOT everyone is suited for it. I’ve known several couples who wanted children only to discover that one or both of them did not have any aptitude for long term child rearing. Yes,the size of your income is a determining factor; so is knowing yourself and your limitations in child rearing. I believe that the basic nature, aptitude, and parenting skills of the sahp is critical. If the sahp cannot enjoy and be energized by the challenges of raising and educating a child for 18 years at 12+ hrs/day for 7 days /wk, then s/he should hire help, get out of the house,make time for spouse,and create consistant time for 100% focus on his/her child.

  21. J's Mom says:

    I agree with your assessment, and we used a formula nearly identical to yours to make our initial decision. It’s definitely been the best decision for our child, due to temperament issues, and it’s been the sound decision financially. My son is, indeed, a little under socialized, so I’d definitely recommend that anyone deciding to stay at home make a commitment to finding play groups for child and mother at an early age. Frankly speaking- normal play group mommies scare me with their Stepford ways. Still, there are a number of free programs offered by local counties, libraries, and sometimes local fast food purveyors have been very helpful in providing fun events for my son to attend to meet other kids. I just wish I’d read this and made it a priority earlier! Thanks for the clear financial analysis!

  22. daemondust says:

    That’s what grandparents are for. Not all the time, of course, but enough that it can save quite a bit of money and keeps them happy for getting to be a part of their grandchild’s life. Spending one week day a week with each side cuts the cost down to around 60% of full time daycare and leaves the child with someone you (hopefully) completely trust.

    • Rob O. says:

      That’s a rather huge assumption, daemondust. Many grandparents may not physically or mentally be capable of handling that responsibility. And I’m sure there are some who would not want that to be a routine assigned duty either.

      We only have one remaining parent – my wife’s mother – and her mental health is so degraded with Alzheimer’s that she can’t even take care of herself much less be in charge of caring for a rambunctious toddler.

      We may be in a somewhat different situation than most, but we have -NO- familial support system whatsoever – our closest immediate-family members are 1000 miles or more away.

  23. Anonymous says:

    Don’t know why my comment didn’t go through, maybe ’cause I typed ‘Anonymous’ in the name. Should I have written “Donkey Butt!?”
    Anyway, the gist of my lengthy heart-felt post that took me about 30 minutes was…

    I tried to work…got calls constantly to pick up my child, even when it was grandparent and then a sister-in-law who had her own daycare at home (paid).

    Do whatever works best for your own situation. I decided to stay home because I just felt that noone would care for and love my children like I do. If you must work, find the best possible provider and switch until you feel it’s right. Your children deserve it.

  24. TeacherMom? says:

    I’m so glad I stumbled upon this website. I’ve enjoyed reading everyone’s comments. I am currently trying to decide if I will stay at home next year. :0

    I have a 10 month old and currently teach second grade full time. Teachers do get a lot of time off, so it is a good job if you have kids of your own. However, with teaching, there is so much outside work. My husband still doesn’t understand why I work so much outside of school and I have been doing this for ten years. 🙂

    If I give more at school, I lose time with my baby. However, if I give more to by daughter, I feel like I short change my kids at school. Uggghhh! At night, I have some time to grade papers, but I find myself exhausted with little time to read parenting books….etc. that I want to read. Also, every Sunday I find myself writing lesson plans and grading papers. I would rather spend that time with my daughter. I think I am leaning towards staying at home, but worried about socialization. Are there any teachers turned stay at home moms out there? What is your advice? Is there a difference between kids who go to daycare and those who stay at home? Thanks for your help!

    • saladdin says:

      I’ll give my input as a 35 year old single guy who has had to date “your” daughters. Stay at home vs daycare is the same (non-financially-wise). It’s the quality of parent that counts. The fact is that the large majority of you are average parents that don’t teach their kids life skillz. Most girls I have dated are 25-30 still live at home or call their parents for money every month. They are spoiled and have no concept of anything but self.

      Kids are a reflection of the quality of parents. If you are a quality person and teach your kids that then they will be ok. If not, they will be pregnant at 16 and you will blame TV or rap music.


    • J's Mom says:

      It all depends on the kids! In our family (cousins, etc.) the kids who go to daycare tend to be a little more competitive/aggressive than those who don’t. Then again, they’re also generally more outgoing and very confident.

      The cool thing about being a teacher is that you can turn your organizational skills on your home life. Make a ‘lesson plan’ and set up a curriculum for your baby! Look at both when you have and really ask yourself if you can make them merge and how? Where are you missing time? Would a babysitter twice a week take care of it? Would day care everyday be necessary? Really, if you can wean you and your child into a new schedule and stay flexible enough to make the tough decisions (if your child is one of the ones who can’t do daycare yet or does great and wants 5 days a week when you only want 3!), you’ll both be great!

      Teachers are soooo underpaid…but money doesn’t actually seem to be the issue for you.=)

  25. teacherpair says:

    Speaking of underpaid teachers, my husband and I are both teachers. I am expecting our 2nd child in a month and trying to figure out what to do for next year. To go back to work or not. I made the switch to a private Montessori school from public school after my daughter was born so that we could take advantage of the fantastic preschool setting.
    Now that baby number two is on the way and we just received our financial aid offer, it is clear that we cannot afford for both of our children to attend the school where I work which accepts infants beginning at 6 months. I am not even sure I could afford fulltime childcare for both in a less expensive setting. We unfortunately cannot afford to live on my husband’s teacher salary if I do not go back to work. What do I do? I am in a pickle! I cannot afford to work and I cannot afford to not work?

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