The following post is by MPFJ staff writer, Grayson Bell. Grayson, who runs the finance blog Debt Roundup, is a fan of personal finance, brewing beer, and working on cars.
Being a relatively new parent, I have battled with the decision to put my son in daycare or stay at home with him.
I think this might be a debate that all parents go through. These days, it is not as common to see one partner stay at home to take care of the children. Many homes are two income households. I am not going to get into why this might be the case, but I will talk about dealing with the daycare versus stay at home debate. This article is just how I handled our situation and how I created a cost versus benefit analysis.
Daycare
Let’s face it. Daycare is expensive.
Depending on where you live, daycare can easily go into the thousands. In my area, you easily pay over $1,000 per child per month to keep them in daycare. You might gasp, but that is how the cookie crumbles. While there are options for daycare in our area, you get what you pay for. You do not want to go cheap when it comes to someone taking care of your child.
Daycare Costs
As I stated, daycare is costly. The good ones in our area easy go over $1,000 per month and you only get one week of not having to pay each year. This is our vacation week. On any other week, we would have to pay for him to be there, no matter if he was there or not. They can charge this type of rate because there is a lot of demand for good daycares. Some in our area have an 8 to 9 month wait.
If you are paying $1,000 a month, then you are hitting $12,000 per year on childcare. Having to dish out this much money per year can be daunting. It also may not be feasible for many. Always take time to check over all of the costs for a daycare you might be interested in.
Benefits of Daycare
There are some that say there are no benefits to daycare. I tend to disagree. My son has been in daycare for a little over a year. While he did get sick often in the beginning, I can see that he is learning a lot and the rampant sickness has subsided. He is being socialized with other kids on a daily basis. He is making friends and he always has a smile on his face. He gets to play all day and seems to enjoy it.
Putting your child in daycare also allows you to stay at work. While this might not be as big a deal to some, I know it is for many. If you are dual income household, you may have to continue to work in order to make ends meet. Daycare allows for this flexibility. Some people, like my wife, aren’t ready to leave the workforce when they have a baby. My wife enjoys her career and doesn’t want to stop it just yet. Daycare has provided the option for her to continue working and building her career.
When you put your child into some daycares, you can also get a tax credit. The tax credit is for child and dependent care. This credit goes up to $6,000, but there are a few stipulations in order to qualify.
- The child has to be 12 years or younger
- The daycare facility must meet certain federal guidelines
- You must have earned income
- Having your child in daycare must allow you to work or look for work. This can also apply to going back to school full-time.
- The child typically has to be your dependent.
The total credit is 20% to 35% of your day care expenses, depending on how much you earn. Learn more from Publication 503 from the IRS.
Some employers allow the ability to apply for a dependent care flexible spending account. This is similar to the health FSA, but it is only dedicated to caring for your child. You can use pre-tax money to pay for daycare, babysitters, and day camps. This is a big savings, but you typically can’t use both a dependent care FSA and the tax credit. You will need to check which one you would benefit from most.
Staying at Home
Being a stay at home parent can be very rewarding. It doesn’t matter if it is the mother or father. Staying at home to watch your child grow is why many parents do it. You get to bond with your child and teach them things that you want them to learn. That being said, there are costs involved with staying at home, but there are great benefits as well.
Costs of Staying at Home
The biggest cost to stay at home is the income you would be losing after leaving the workforce. This is one of the biggest factors to why some people don’t stay at home with their children. This was an important factor for us. When you stay at home, you tend to use more electricity, eat more food, and do other things that will fill up your time. These all increase the costs of being a stay at home parent. It can be costly to entertain a growing child as well with toys, shows, games, and travel.
The biggest decision for us was the loss of one income. My wife makes more than what we are charged for daycare. Since we would be losing a substantial amount of money, it made more sense to go the daycare route. This type of calculation should be made before you decide one way or the other.
Benefits of Staying at Home
This is where the calculation really goes to the emotional side. There are many emotional benefits to staying at home with your child. You get to bond and teach your child. You get to spend your days watching your child grow up. This is the biggest benefit for being a stay at home parent. Some will say that a benefit is not having to work, but I would disagree. Raising a child is a lot of work. It might even be harder than the job you left to have a child. Yes, you don’t have to travel into work, but you are still on the clock!
There are also benefits for your child to have a stay at home parent. They get to bond with said parent. They won’t face as many illnesses compared to daycare. They will also learn exactly what you want them to learn. It is hard to measure the true benefits for your child, but the emotional aspect can be great.
Along with being with your child, many parents see that they drive less and spend less on clothing. When you don’t have to drive to work and have dedicated work clothes, those expenses are reduced.
When you are having a discussion about daycare versus staying at home, you should think about doing a cost benefit analysis. For my wife and I, the benefit of daycare outweighed the cost of it. While being a stay at home parent would be exciting, it is not in our plans at the moment. This would all change if we had another child. The costs of having two kids in daycare would really swing the equation for us. This is something that you would need to discuss when this important conversation comes up. No matter which way you decide to go, make sure to make the best decision for your family. Each situation is different.
How about you all? In your situation, would using daycare or staying at home make more sense economically and emotionally? What factors influence your decision the most?
Share your experiences by commenting below!
***Photo courtesy of FreeDigitalPhotos
