Mint has you covered during coronavirus. Stay up-to-date with the latest financial guidelines and resources here.

MintLife Blog > Financial Planning > The Cost of Daycare vs. The Cost of Working

The Cost of Daycare vs. The Cost of Working

Financial Planning

New parents often have to confront the decision of whether both parents will remain in the paid workforce or whether one will leave the workforce to stay at home and raise the children.

Finances are a major consideration when making this choice, but shouldn’t be the only consideration.

Here are some facts and figures to help you look at your own situation and draw the conclusion that is right for your family.

Average Cost of Daycare

A 2011 infographic prepared by the US Census Bureau reports that on average, families pay $143 per week for child care.

For preschoolers, the figure was a bit higher ($179 per week), while for grade schoolers, the figure was lower ($93 per week).

Assuming the child is in daycare for 50 weeks out of the year, the average yearly cost is $7,150.

On average, families living below the poverty level spend 30% of their family income on daycare, while families with incomes higher than the poverty level spend 8% of their family income on daycare.

Cost of daycare varies widely across the nation.

For middle class New Yorkers, daycare can easily reach $25,000 to $30,000 per year per child. In New York, child care represents the single biggest expense for low-income families, bigger even than food and housing.

Median Take-Home Pay of First Time Parents

On average, college educated women have their first child at age 30.

Median household income in the USA is $52,762, based on 2007-2011 American Community Survey data.

Households in the 25 to 34 age bracket have a median income of $50,774, according to U.S. census data. So average-aged new parents with average income, living in an average city, can expect to spend around 13% to 14% of their household income on daycare.

Putting Your Child in Daycare: Pros

For most families, hiring a nanny isn’t realistic, so if both parents continue to work after having a child, daycare is their go-to solution for child care during Mom and Dad’s work hours.

Children who spend time in daycare do experience some advantages over children who do not.

For example, children in daycare develop social skills early on, because they’re placed in social settings at a young age.

Studies have indicated positive effects of daycare on academic achievement, particularly for children in low-income households.

They generally learn to cooperate with others and with teachers or other authority figures, and learn to cope with separation anxiety before they start school.

Putting Your Child in Daycare: Cons

If you put your child in daycare, it is important to have back-up plans in place, because children in daycare are more prone to common illnesses like colds, flu, and ear infections.

However, children who are not in daycare tend to pick all these illnesses up when they start kindergarten anyway.

There have been studies suggesting that children in daycare may behave more aggressively. This may be due to stress in children, or due to a poor fit with their daycare center.

Carefully choosing a child’s daycare center can help minimize his or her stress.

The choice of one parent staying home to take care of children while the other parent works, or putting children in daycare while both parents work, is one of the most difficult decisions parents have to make.

And it isn’t just mothers choosing to be stay-at-home parents. Over the past decade, the number of men who left the workforce to raise children doubled, to 176,000.

Indirect Costs and Savings

When weighing the cost of staying home with children versus putting them in daycare, consider indirect costs such as a loss in earning power if one parent stays out of the workforce for several years.

According to Tony Carnevale of the Georgetown Center on Education and the Workforce, college graduates who leave the workforce for five years could forego up to $1 million over their lifetime, depending on their profession.

You should also consider the indirect savings involved with staying home with children.

For example, the parent staying at home can prepare meals and lunches that will cut family food expenditures, and that parent’s commuting and professional wardrobe costs will go away as well.

Your decision should be based on a range of factors, and not what your neighbor, sibling, or parents did, because no family is exactly like yours.

Mary Hiers is a personal finance writer who helps people earn more and spend less.


Leave a Reply