The Financial Cost of Stay-At-Home Parenting

What should you consider beyond your baby is cute, your boss is not and childcare is expensive?

Stay-At-Home Parenting Costs

Five Figures to Consider

54% of all bachelor’s degrees are awarded to women
31% of married mothers did not participate in the paid labor force in 2018
4X is the multiple of annual salary lost for each year a caregiver is out of the workforce
24% increase in childcare costs in past decade
30-40% decrease in probability of employment upon motherhood

Like mysteries? Here’s one. American women now earn 54% of bachelor’s degrees yet the share of women in the workforce is about the same as it was in 1995. Why? One reason, according to a 2018 study, is many women are caught off guard by the time, effort and money it takes to raise children. Though they have invested in their own education and expect to maintain a career, a woman’s probability of employment declines by 30-40% upon motherhood. Among married mothers, 31% opt out of the workforce to take on a stay-at-home parenting role. (Of all parents, 27% of mothers and 7% of fathers stay at home.) When a career pause can cost a family as much as four times the parent’s annual salary for each non-working year, what do you need to consider?

Beyond lost wages, moms and dads who don’t return to work forfeit growth in those wages and in retirement and other benefits like Social Security. Because it’s cumulative, these costs can actually amount to a lot of money. Quitting a job to avoid child care expenses does not make child care free. Michael Madowitz, an economist at the Center for American Progress (CAP), created an online calculator to take the guesswork out of the equation. You enter your gender, age, current salary, when you started working full-time, when you plan to stop working, how long you intend to stay out of the workforce, your planned retirement age and you and your employer’s current 401(k) contributions. The tool then tells you how much you stand to lose in total lifetime earnings. For example, Five Figure News used the calculator to find out how much it would cost a 26-year-old mom making $54,652 (the median pay in the U.S. for a woman with a bachelor’s degree) to leave the workforce for five years to raise her children. In addition to $273,260 in lost salary, she will also lose $328,656  in wage growth and $275,966 in retirement assets and benefits. The total? A whopping $877,882.

Factors beyond finances obviously influence someone’s decision to become a stay-at-home parent. But for many, when monthly childcare costs roughly equal monthly take-home pay, the calculation seems like a no-brainer. The Department of Health and Human Services recommends that families spend no more than 7% of their household income on child care, yet there’s just one state (Louisiana) in the country where middle-income parents can readily follow that recommendation. In the past decade, childcare costs have increased 24% and are roughly double the price of a year’s tuition at an in-state public university.

Think five years or more at-home and then back-to-work is easy? Not so. Many find getting a foot back in the door difficult. Occupation-specific skills may deteriorate, contacts dwindle and industry expertise may lag recent innovation. Returnees can have a tough time “catching up” on lost experience and may need to accept a less prestigious position at lower pay. The longer the time away from the workforce, the harder it becomes to get back in and the greater the total income loss. A Goldman Sachs, Global Markets Institute study found that 20% of potential lifetime gross income was forfeited after just five years out of the workforce.

Unfortunately, the United States lacks family-friendly policies such as paid family leave, universal preschool and subsidized child care. When considering the rise in the number of hours moms spend on childcare these days (14 hours per day in 2016 versus 10 hours in 1965) and the number of hours top quintile wage-earners are spending at work, many dual-earning couples decide one partner, usually the mother, should stay at home to care for the kids. The financial angle is only one aspect, of course, when deciding whether to take a workforce break but it is an important one so all the more prudent to consider its long-term effects. The true price may be higher than it looks at first glance. 



American Management Association, The Brookings Institution, Bureau of Labor Statistics, Center for American Progress, Department of Health and Human Services, Federal Reserve Bank of St. Louis, Goldman Sachs – Global Markets Institute, Pew Research,