Is there a financial ‘sweet spot’ for families?

[Chiliconcarne]

Just chatting with a friend about this.
shes a single parent that works full time and I’ve had my first baby and about to go back to work part time. Although fortunate that I’ll have no childcare costs and have a DP.

we were discussing how people afford to have a family with how high childcare costs are and we realised that there seems to be only 2 financial ‘sweet spots’ where you can actually be financially okay without being completely screwed.

1. if your a couple and one parent works full time on a minimum wage and the other stays at home. You’ll then be eligible for top up benefits and no childcare costs. Your also entitled to grants like sure start etc. the top ups actually equal out to that of someone on a decent salary.
2. If one parent is very high earning so money isn’t an issue regardless of if the other parent doesn’t work or not.

You seem to get screwed most if:

1. One or both parents earn slightly above average. So say a nurse/teacher on 35K. Not enough to be eligible for any UC. Yet not enough for a lot of people to cover mortgage/rent plus all bills and supporting a household of 2 adults and 2 kids. So both parents have to work. But then have to pay childcare out of that second salary so the second salary isn’t for ‘spending’ but to over the overflow of bills the first wage can’t cover but then the rest goes on childcare.

My friend said that if she were to work 16 hours on minimum wage as a single parent her ‘spends’ would be much greater plus she’d get more time with DC. Yet because she’s on 28K she does get the childcare element of UC but nothing else and no help with housing benefit or anything. She was advised by the job centre to work 16 hours minimum wage.

it’s just such an odd situation generally speaking. Unless your high earning your financially most comfortable to be very very low earning? So it’s a bit like an either/or situation. Either have kids if you have so much money that 1K plus in nursery fees won’t dent your finances or earn hardly enough so you can be ‘topped up financially.
But if your in between that you get 0 top ups but also have to pay full cost for everything.

Ive also often heard people say when someone on 35K is struggling ‘I manage to do it and I just earn 20K so you need to budget better’

However the take home on 35K is 2K give or take pensions/student debt.

if your a family of 2 adults, 2 kids and have one in childcare full time that’s easily 1K per month at least. That leaves you with 1K. Housing is usually at least £550 per month if your luckily and in a cheaper area then council tax of at least £100 that leaves you with £350 for gas, electric, food, bills, water, internet etc to support an entire family?!!

if you earn 20K then you may get discounts on council tax, some housing benefit and top up benefits from UC. It’ll equal out that you either both have £350 for bills and food like the 35K household or sometimes a bit more?

so actually the 20K household doesn’t budget better, their just eligible for support.

It’s not benefit bashing or anything as everyone should have a good standard of living. I just think it’s insane how the system works.

Am I missing something?

Also excuse typos as I’m on my phone!

If you pay rent and are claiming Universal credit you will always get a rent element so it's not true to say she gets no housing benefit. However her earnings reduce the whole claim. No way would the job centre advise anyone to just work 16 hours, they want people working as much as they can.
The main thing you are missing is thinking longer term - those who try to work at least a decent amount of hours and keep working to keep their careers going will benefit in the longer term. HIgh childcare costs are short term.

@Babyroobs good point! That’s why she’s stuck with the 28K job because of the longer term prospects as this particular job has room for progression.

Although that being said as a registered professional you can dip in and out so long as you keep up your registration so you can take a few years out for kids etc.

and yes I’m shocked at the job centre! She said that the woman that worked there wouldn’t tell her how much she would get based on hours etc but said to her ‘your best bet is to just work 16 hours and enjoy your baby, you’ll get free funding when eligible and you can focus on work then’ apparently the woman was really nice but my friend was shocked that it’s screwed her so badly!

Childcare isn’t forever though. It’s not like you have children and you’re condemned to 18 years of childcare. It’s a few difficult years depending when you go back to work.

Most people just get on with it and suffer a bit through those tricky years then reap the rewards of having a decent paying job in the long run.

You’re definitely talking as someone who has only just had their first baby OP. Sorry!!

When I first had DD, I wanted to look for work whilst I was on (I think) income support and tax credits, I was also told not to bother until DD was 5 and to just enjoy her whilst she was small. So it's not unusual for them to say similar.

What do you mean? What’s wrong with what I’ve posted? surely facts are the same if you’ve had 1 baby or 5 babies?

I think the 'sweet spot' for many families is not having to pay for housing (living with family or being mortgage free) or childcare (having family help), as for most people, these are the highest outgoings.

Going back to the examples you have given, they have focused heavily on the early years, but as families grow, their needs change.

Example 1 (1 working at NMW and the other a SAHP). I could be wrong, but from reading on MN, I believe that the SAHP will be required to look for work at some point. I can imagine it being pretty difficult to fund a family on 1 NMW salary, with a teen with hollow legs and adult sized feet.

Example 2 - a high earner will always have choices, so they will always be in the sweet spot.

Example 3 - family with Nurse/teacher. Childcare is a killer in thr early years, but it gradually decreases. People in these types of roles may progresses their careers during this time, so by the time they don't have childcare costs (eg youngest starts secondary school), they have two decent salaries and no childcare. So they move into the sweet spot.

Yes I suppose your right and that it’s delayed financial rewards for middle earners. I guess that’s hard to see when your at the baby stage.

Yup thats right.

when my DH was £40K i need to stop working because we couldn’t afford to pay childcare and mortgage. I was minimum wage. its no point to work for me because childcare is soo expensive.

now DH £70k and i’m back to work because I could afford childcare for 1 child. But if i have 2 children its no point aswell. Childcare for 2 children is bigger than my wage. Its better for me to be Stay at home mum.

This is one of the main reasons we have one child. Even with parental help two would mean lifestyle choice we didn't want to make.

That’s so sad! The fact working people above a certain financial threshold have no help mean they can’t afford to have more than one is crazy when you can have more than one if you earn a minimal amounts. It just doesn’t make sense.

That’s taking a very short term view on finances.

Look to the longer term and by working more you have better prospect of a higher paid job, bigger pension pot etc. Childcare years don’t last forever.

Yes others have said what I was trying to say :)