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Does It Pay to Work When Paying For Child Care?


By Tim McMahon, Editor

If you have children and are deciding on work, one consideration is how much money you will actually have left after paying for childcare. Sometimes, if child care expenses are high, you may even wonder if it is worth working at all. After all, if the additional expenses associated with working plus childcare exceed what you make from working, you will not be getting ahead but could actually be getting further behind. So let’s compare those expenses.

Calculating the Advantages of Working

First you have to calculate your “net income” or “take home pay” — this is usually easily obtained from your pay stub. It is the amount you get after taxes, FICA and retirement are withheld. You also have to subtract things you wouldn’t spend if you stayed home, like special meals, work clothes and commuting expenses. However, you get to add the value of benefits you wouldn’t have if you stayed home, like health insurance or retirement benefits.

Calculating The Costs Of Child Care

The cost calculations are relatively straightforward if you already pay a daycare or babysitter. You might add any additional mileage to get to the daycare but that is about it. Of course if you haven’t started daycare yet you can choose from a variety of types of childcare each with varying expense levels. Costs also vary depending on where you live and the ages of your children.

Childcare Costs

According to Baby Center the national average is $679 per month for baby and toddler care and $535 per month for full-time daycare for preschoolers but can range from $417 per month in some low cost states to $667 in high cost states. Home daycare is slightly less expensive with babies and toddlers averaging $525 per month and preschool age children costing $474 per month in a home based daycare.

Estimates at Minimum Wage

As an example, let’s look at working for minimum wage and paying for child care. The average minimum wage throughout the United States in 2010 is $7.25 although some states are higher. So assuming a 40-hour week means you would gross $290 per week or $1160 per month. Social Security and Medicare take 7.65% or $88.74 leaving you with $1071.26. If you spend an average of $50 per week on transportation, $30 per month on clothing for work and an additional $20 per week on lunches that is $310 per month, leaving $761.26 assuming zero taxes are withheld.

Net Income for Minimum Wage Earner After Day Care

With a net income of $761 before taxes and an average of $535 per month in daycare expenses you are really only making $226 a month for 160 hours work. This is about $1.41 per hour after day care expenses. If you have two children in daycare and it costs you $1000 per month for both and you are only netting $761 you would actually be losing $239 per month by working. Based on your own numbers you must decide whether it is worth working or if you will need to explore other options such as working from home in a position like a Social Media Marketing Consultant or some other alternative childcare arrangement. Of course as your income increases above minimum wage the financial advantages of working increase as well. So if you can swing it, you may want to stay home and get an online degree before heading out for a higher paying job.

See Also:

Social Media Marketing Consultants Needed

10 Awesome Jobs You Can Do From Home

The Difference a Degree Makes in Unemployment Levels

Great Jobs for Those with a College Degree

Online Degree More Affordable Than on Campus

Stay Ahead of Your Competition With Online Continuing Education Courses

 

About Tim McMahon

Work by editor and author, Tim McMahon, has been featured in Bloomberg, CBS News, Wall Street Journal, Christian Science Monitor, Forbes, Washington Post, Drudge Report, The Atlantic, Business Insider, American Thinker, Lew Rockwell, Huffington Post, Rolling Stone, Oakland Press, Free Republic, Education World, Realty Trac, Reason, Coin News, and Council for Economic Education. Connect with Tim on Google+