To ask you to explain the childcare costs from family budget theory/model(19 Posts)
I have 3 children, I started with my first at 30 when I had a career. I have a degree, masters and professional qualifications. It was the job that required long working hours and travel.
I worked when I had only 1 child, but 2+ children the childcare costs were greater than my wages. I gave up work and 10 years later I am doing a school hours/term time job on minimum wage.
Our budgeting thought process was if childcare costs more than the wage of one of the parents, then why work? Financially it would be £100s out of pocket.
I've heard another theory though, but I'm still not sure I buy into it. As childcare costs are a family cost, then they come from the family income, ie the combined income of both parents.
If parent 1 earns £18k net, parent 2 earns £50k net, childcare costs £25k out of net salary. The childcare costs leave £43k net.
Or, as per my family finances:
Parent 1 doesn't work, parent 2 earns £50k net, childcare costs £0.
Where I live childcare for pre schools costs £45/day. For school age, breakfast club is £5 per child and after school club is £15, childcare over school holidays is £30/day. So, whilst childcare reduces in cost, it doesn't drop to an insignificant amount.
Not just more income as a family but also a lot less stress as child sickness isn't a problem to cover, child drop off and pick up times not a problem, school holidays and inset days not a problem.
... But your childcare does still cost, its an opportunity cost you'll likely pay when you try to re-enter the labour market. Of course, if you don't plan on returning to work or work in certain fields this might not be relevant, but that's the thinking in our household.
It sounds like nor working is what works besr for you and your family.
fwiw I think it depends on context. If one parent is considering or would like to stay at home then it makes sense to work out the added money that would be brought in if they worked, ie the lower paid's paycheck - childcare. If both parents work and childcare is paid for then assuming they have separate finances, the childcare should be divided between them according to prior agreement. It may seem academic but if they split then childcare should not continue to be 'her expense' surely?
Enjoy your childen while you can if finances allow, being there for them and caring for them full time and not missing a thing, you'll never regret that.
And I assume it's her because it usually is, despite lots of posters describing earnestly how by amazing chance their dh earns so much more in his high powered demanding job and therefore in their very specific circumstances it is the woman who will stay at home and deal with all the child care and household admin.
Obviously each couple must do what works best for them However all too often women give up work due to child care costs and never get back to work ,or at least never get back to non pin £ jobs
I always took the long view and 10 years down the line still earn in parity with my DH
Have seen so many friends give up work Easy to do not so easy to reverse
And if he leaves you for the OW ..,
i think you need to think bigger picture. Yes on paper your family income might be better with a stay at home parent rather than paying for nursery. However, in the years where you are staying at home if you had been working you would be becoming more senior/experienced and likely to be earning more money. If you stay at home with maybe a part time job likely your income will always be low and you may never do the type of work you originally trained/studied for. Factoring this in, over the course of a couple of decades and you might find you would have been better off financially. Only talking financials, whatever works best for you as a family is most important and difficult to put a price on having a parent around. I do work but nursery is very expensive and really I'm only a couple of hundred pounds a month better off working but really not sure I would manage to look after 2 children full time so much admiration to those that do.
I did the years of wages almost cancelled out by childcare, but my career progressed and now I have no /minimal childcare cost and promotion. Dh on the other hand was made redundant. I am mighty happy to have my job. I think you always need to look at the long term.
I guess it ends as the woman stopping work as it is her who is at home on maternity leave. So for 6 months - a year the family is down her income but no childcare costs.
For her to return to work there is an immediate and direct effect on family finances. She goes back to work, but family finances go down not up.
Additionally, stress on the family goes up too.
Your childcare costs arent zero. They cost whatever salary you have given up including potential promotions and pay rises you would have been eligible for. You may be £7k better off on paper (using your example) but if you had stayed in work your salary and earning potential could have increased beyond that £7k (over 10 years its very likely infact!)
Also at 30, with a masters and professional quals you were surely earning more than £18k?
I worked ft and childcare costs were greater than my wages. I have 2 kids and am so happy I persevered through tiredness and exhaustion.
I am able to earn now more than my ex and the split with him didn't hurt me as much financially as it would if I was in your situation.
What would it take for you to get back to your old profession?
Kids will doon be able to look aftwr themselves in all thise scenarios you are describing.
I'm due to go back to work & have been offered reduced hours and be paid £200 less pm. Childcare would have cost £200 so £100 each. Is it unfair that DP only gives me £50 towards my loss so he's 'getting something out of not using a childminder' too. (I'll be getting an extra day off work so that's my 'perk'). It'll cost me £50 more pm to be off with dc but that should be offset by the fact I'm getting a day off...
That calculation omits pensions contributions, career progression and hedging against job loss, long term illness or death of one parent.
It's also couched in term of "parent" 1 and 2, when it really should be "spouse" if the one giving up work wants any sort of toehold by which their contribution to the household will be recognised should there be a split. If it's "cohabitant" 1 and 2, the one who gives up working is in a rather vulnerable position.
Are you factoring in pension costs (because the working partner is paying in, right?) & career progression costs?
The problem with the bald model you state is that it doesn't truly factor in all opportunity cost. Strangely, nor does it often assess alongside both partners taking an equal hit for the period of time in which childcare is needed.
What would the figures look like if you both used a mixture of compressed hours and childcare?
I worked FT. With 2 DC in nursery, my salary just about covered nursery fees. But I was still contributing to my pension and I was making progress in my career. Besides, DH and I saw it as a joint expense - it seemed logical since we were both working FT.
The DC are now 10 & 11. I still work FT, and I now earn almost 3 times as much as I did 10 years ago. In fact I earn considerably more than DH does, and my salary should rise further over the coming years. I'm also likely to end up with a better pension than DH.
Which means that we can now afford lots of things we never expected to be able to afford (big house, private school, etc.)
I don't regret my choice at all. But equally I have friends who have either dropped to PT or given up work and are happy with their choice.
Doesn't both of you working mean you have two tax allowances to benefit from? So if both of you work you get 8k tax free but only 4k on one wage? My figures may be well out but you get the gist.
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