Should My Spouse Work or Stay Home?

For many families, the expense of adding an additional member brings up the question of whether or not it makes financial sense for one of the spouses to continue working or to stay at home to care for the children. When both spouses make a high income, it usually makes sense for both spouses to work and utilize childcare services because the lower-earning spouse's income exceeds the cost of childcare. However, when one spouse doesn't make a high income, it's in your best interests to examine the trade-off and determine if it makes sense for him or her to work or to stay at home. (For related reading, see: Keep Working or Stay at Home With the Kids?)

The Cost of Childcare

Consider this. Your youngest child attends a daycare facility which charges $400 a week for childcare. If we were to multiply this figure by 52 weeks in the year, that's a tad over $20,000 in after-tax expenses. If we were to factor in 25% for taxes (i.e. Social Security, Medicare, federal tax withholding, state tax withholding, state disability), the break-even point is roughly $28,000 per year, meaning if your spouse earns a pre-tax income of $28,000 or more annually, it makes sense for him or her to work. If he or she is earning less than $28,000 per year, it makes more sense to stay at home (because the cost of childcare is greater).

What if you have two children in daycare? The oldest attends pre-school at a rate of $1,300 per month (or close to $16,000 per year) in after-tax expenses. If we were to factor that same 25% for taxes, your spouse needs to make an additional $21,000 per year in pre-tax income. Adding up the two figures for both kids, your spouse would need to make an annual income of at least $49,000 for it to make financial sense for him or her to work. An income less than $49,000 means that it costs you more to put both kids in childcare. (For related reading, see: The Economics of Stay-at-Home-Moms.)

Keep in mind this is only a starting point in determining whether or not it makes sense for a spouse to stay at home. A stay-at-home parent can also mean additional expenses to feed and entertain the kids, costs which are already included in the childcare expenses. For some, the benefits of childcare—social interaction with other children, learning opportunities, time away from the child to decompress—may far outweigh any financial costs. In the end, you’ll want to do whatever is in your children’s best interest because the decision to stay at home is first and foremost a decision based on your values. Knowing the financial costs of a spouse working vs. staying at home can help you make an informed decision while you work towards incorporating these values with your financial goals. (For more from this author, see: 3 Ways People Inadvertently Disinherit Loved Ones.)

The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC.