Friday, April 5, 2013

Is it Worth Having Both Parents Work?

Every new parent goes through this same difficult question.  Should one of us stay home and raise the child or should we both go to work and pay for daycare?  It's a difficult discussion in it's own right, and it is almost entirely based on the financial rewards for such a proposition. 

I was inspired by this article from the NY Times which talks more about the tax implications of women with childcare expenses.  Basically, a person married to someone who earns much more then them will have their own income taxed at the same level as the higher parent's income.  Couple this with the high cost of childcare, and the actual take home pay might not be as enticing as once thought.

Take for example the case presented in the article.  A parent with an income of $45,000 married to someone making $90,000 will be taxed at a higher marginal tax rate of about 25%.  Their take home pay after taxes, social security,medicare, and any other withholding will most likely be around $30,000.  Now the average daycare expense in NY State for a child is $14,000 leaving the parent with $16,000.  I'd also like to add in some further expenses the article doesn't talk about.  How about having a second car ($1,000 for insurance, $2,000 gas, $750 for service, parking $1,440)?  Subtract this from your take home expense and you are now looking at a take home pay of just $10,810.  All this expense just to get you to work and have someone else take care of your child.

Now we are at the crux of the real question here; is spending your time with your child worth an additional $10,810?  Many people might make the decision that an additional 10 grand isn't really worth it, and I wouldn't blame them! 

Deciding who or both parents should work is a very personal issue, and it requires some tough critical thinking.  Make sure you do your homework, compute the math, and factor in the intangibles and you should have a much clearer picture of your decision.

Wonderful Moment of the Day: Finally starting to look like Spring.

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