The WOH/SAH decision: Finances

First off:  for the nth time, no you do not need a SAHP in order to have a kid.

The Get rich slowly forum seems to be full of people like my rigid Uncle and his evil SAHM wife who lectured me at my grandmother’s funeral about how horrible it was that I was staying in the labor force (meanwhile, one of their teenage daughters desperately tried and failed to get caught by her parents smoking pot and cigarettes).

They say, “If you cannot afford to have one parent (the mother) stay at home with the kids, you should not be having children.”  They say, “It is too expensive to send your kids to a day orphanage/baby farm.  You cannot properly bond with your babies.”  (Actually, it’s only one nutty chick who says the latter and the first time she said it I thought she was being sarcastic… the nth time I’ve realized she’s just a troll.)

The strong research evidence is that moms who both work and send their kids to daycare bond just as strongly as moms who stay at home with their kids.  Throughout time mothers have shared child-rearing in groups rather than solo.  The one adult-with children model is not natural or normal.  It takes a village to raise a child, something that most SAHP realize, the difference being that money generally does not exchange hands in a playgroup or for informal care from relatives.  I haven’t seen research on father’s bonding because nobody seems to care (or because it’s harder to get working dads into the lab), but I bet you when both spouses work the father is more likely to bond than when he’s working 80 hour weeks to bring in money.  So, just to get that out of the way you’re not doing irreparable harm to your kid by putting hir in daycare, and daycare has benefits for the kid just like SAHP has benefits.  They’re different benefits, but one isn’t necessarily better than another.

Anyhow!  This is a Monday money post so the focus here is on the money aspect.

1.  Point in time cost-benefit analysis:  One argument is that the lower-earning spouse needs to do a point-in-time cost-benefit analysis of work income compared to the cost of daycare.  In this include not only the money going to daycare, but also commuting costs (assuming you’re not going to be driving everywhere as a SAHP, which is not necessarily a great assumption if you want to stay sane), professional clothing, etc. (or minus the cost of boredom-induced shopping if you turn into a Gymboree mom just to get out of the house).  They argue that if it costs more to work than it does to pay for daycare, then don’t work.  This argument makes some sense, especially if there are multiple pre-school age children and you’re not working a job that you particularly enjoy.  If you *do* enjoy your job, you should factor that into your equation since we should be maximizing happiness instead of money.  If you *don’t* enjoy your job, then maybe now is a good time to retool and think about your next career moves, regardless of your fertility.  So the idea is:


Cost of work – cost of daycare + happiness from working – disutility from working > Cost of staying at home + happiness from staying at home – disutility from staying at home, then you should continue to work.  If the sign flips, then you should stay at home.  This formula is incomplete– move on to #2.

2.  Add in Net Present Value of Lost Opportunities.  The point-in-time cost-benefit analysis is not where you should stop, however.  When you leave the labor force, you lose what economists call “human capital”– this is the abilities you get from working.  It comes in firm-specific human capital or all the things that make you valuable to a specific company, and general human capital or the things that make you valuable to the labor force as a whole.  When you leave the labor force, you start to forget how to do things and you stop keeping up with how the company, the industry, the workforce etc. are changing.  You get left behind.  That means when you restart in the labor force, you are likely to start at a lower (inflation-adjusted) salary than when you left — not the salary you would have with raises had you stayed in the field, not even the same salary as before with a 2 year gap, but an actual lower salary.  Add to that, if you are in a career-type job, specifically one that is not female-dominated (unlike nursing or teaching), you can be “mommy tracked” or have an even more uphill battle to be taken seriously in your career.  These problems will be worse in some fields and some specific jobs than in others.

So in this case you would have to take the same equation as above, but include the Net Present Value of your future benefits (this is your future income streams) instead of your single-year income alone.  You will compare your predicted future income with the work gap and without.  How do you predict your future income with and without?  Well, that’s difficult to do, but perhaps you have some ideas of career trajectories in your area.  Included in that calculation will be the probability that you get rehired, and the probability that you’ll be put back on the same track rather than forced to downshift if you return after an absence.

3.  Include Benefits, not just salary:  Don’t forget the value of lost retirement benefits that your company is paying for you when you make your calculations.  Are there other fringe benefits you should be considering?

4.  Risk:  What if the main earner loses his (or hir) job?  Many couples take turns being unemployed in this labor force, regardless of whether they are white collar or working class.  How secure is your partner’s job?  What would you do if ze lost it?  How quickly could either of you find work, and at what level?  A sizable emergency fund (or a dividend stream providing enough income to make you independently wealthy) can reduce the risk.  But if you don’t have that, having a second income and a second career to fall back on can dramatically reduce the stress of a lengthy job loss.

5.  Risk II:  Divorce or Widowhood:  What will you do if your spouse leaves you and isn’t good about paying child support?  What if the unimaginable happens and you’re left a widow or widower?  Do you have enough of your own resources to get through a divorce and its aftermath without a job?  Does your working spouse have enough life insurance to keep you and your children afloat until you can get back into the labor force yourself?

6.  Time to change careers?:  Are you thinking about a career change anyway?  If so, a break from the labor force may not be as damaging to your future income and future career.  You may want to spend some of your time out of the labor force retooling if you can get time away from child-care to explore education or new career options.

Before you take the plunge:

1.  Read Your Money or Your Life to help think about how your  career, job, and money fit into your life.

2.  Try living on one income (that of the spouse who will be working once the child is born) before the baby comes.  Doing so will help you understand what it means to have your income reduced (yes, some things will change, you’ll have more time to cook or grocery shop… though probably not anywhere near as much time as you think as babies are pretty exhausting, but you will also have increased expenses you that may balance that out– like paying for family health insurance rather than dual single insurance).  More importantly, living on one income will help you build up a large emergency fund that you almost certainly will need to tap at some point during your child’s early years.

Remember that being a stay at home parent is a form of financial independence.   It is not a bad or a good thing, it’s just a thing.  Make these calculations through the lens of financial independence– how much sacrifice do you want to make for temporary early retirement?  How will this decision fit into the rest of your life?

27 Responses to “The WOH/SAH decision: Finances”

  1. feMOMhist Says:

    most terrifying book I ever read The High Cost of Motherhood.

    Still this year living on sabbatical half pay I’ve realized that we basically could afford for me to become a independent scholar/quasi SAHP, which may be what I decide to do in the near future.

    However I can’t say that I find economics the most compelling reason to WAH. I do realize that it is privileged to be able to choose between my fulfilling (for the most part work) and a not-dire economic situation, but I’d like to include a small plea for consideration of the non-remunerative aspects of WAH

    I work because I EFFING WANT TO, because I spent a sizable part of my young adulthood preparing too, because I want my children to see me as other than/in addition to “their mom,” because the work I do changes the world a little bit at a time every day, and I want that for my kids, because someday, god willing, the kids won’t be living with me any more, because ….

    • nicoleandmaggie Says:

      We’ve talked about those in the past. Today’s a money Monday, so it’s about the moneys. (Though of course, your happiness from work/home is included in the first equation.)

      In our household we could easily live on one salary… but we would also be losing a huge amount of money over the lifetime if we chose to do that. Personally I’d rather early retire when I can do it with my spouse rather than without (if we ever choose to retire).

  2. Linda Says:

    I’m not even a parent (nor will I ever be) but I love this post! Great analysis of the true financial aspects of this issue; like most big money decisions, the formulas are complicated.

    On a side note, those GRS Forums can be brutal. I think most of folks that hang out there are “money geeks” who are extremely conservative financially and socially. Anyone who wants to factor intangibles or emotions like happiness or love into decisions about finances is pounced on. Well, that’s been my experience at least.

  3. bogart Says:

    Right. Depending how you organize your household, there may be other costs to factor into staying home, too. As in, I debated with myself Saturday (when I was AH despite being a WOHM) whether it was worth doing anything (lighting a fire in the woodstove or turning on the furnace) to raise the temperature of our home over 60 degrees or whether we should just go out-and-about and leave that ’til evening. We chose the latter. We definitely heat (and cool) the house more now that DH is a SAHH; he’s also available to do more maintenance/improvement of the home (SAH: It’s not just about cleaner floors.)!

    You present the possibility of unemployment but Elizabeth Warren (in The Two-Income Trap) has a different take on this issue for one-earner couples, namely that the non-earner is better able to quickly re-enter the workforce if the breadwinner is laid off and to reduce the income loss while the breadwinner focuses on finding another “similar” job to the one that was lost. I don’t know that she presents any data, though, and I’m not aware of any showing which “setting” (two earners, one becomes unemployed; one breadwinner who loses hir job) is financially worse or in what contexts. Certainly factoring in stuff like health insurance in today’s US might push the argument away from what she suggests though that, in turn, would depend whether we’re looking at a couple where both have roughly equal incomes (or at least benefits) or whether one is already working a noticeably less-remunerated position.

    Last but not least, I’d ask (implicit but not I think explicit in your post) what the cost will be — even if everything goes according to plan — if one exits the workforce full time during early years planning to re-enter it full time “once the kids are in school.” My perception is that there is a pervasive and pernicious myth that preschoolers need full-time parenting but that school-aged kids are blissfully able to manage their own lives. Here I’ll admit I’m really presenting a non-monetary query (on Monday! The nerve!), though there are a monetary aspects, but among the things that drive me craziest is the push to leave the workforce until the kids are in school as if, once that happens, they won’t need their parents around (much) anymore. I’ve parented or step-parented every age except 5-15 at this point and let me tell you: ain’t so.

    • nicoleandmaggie Says:

      I think Warren’s analysis doesn’t quite fit in this instance mainly because people often make their decisions about housing and lifestyle inflation etc. before their decisions about whether or not to stay in the workplace post-kid. So you may not be able to leave the workplace because your fixed expenses were build on the assumption of a dual rather than single income. But that doesn’t actually make dual incomes riskier than single once the fixed spending has already been set– rather the opposite.

      The other thing that bothers me is that if folks make all those fixed expense choices based on one income but have two incomes they’re actually much better off… she just assumes that nobody is capable of doing that– they spend to meet their income. And maybe that’s true because of psychology stuff, but it doesn’t have to be true.

      Re: when do kids “need” you “more”– not going there today. We have a deliberately controversial post that will probably never be finished on the topic. In reality it is probably very kid-dependent and in most situations (special needs aside) kids probably can handle both parents working outside the home. As my kid gets older I expect hir to spend more time taking care of me rather than the other way around! (I guess we went there after all…)

      • bogart Says:

        Yes, I think that’s fair, re: Warren.

        Your last paragraph made me laugh (“…a deliberately controversial post that will probably never be finished…”). My personal, plural-anecdote driven take is that (typically) your kids always need you (certainly at least until they become adults by whatever marker of that you want to use) and that it is better to count on them needing you to be able to be out of the workforce some throughout their lives (e.g. by using flextime, PTO, FMLA, whatever… and, by extension, having the resources that make those accessible) at perhaps unpredictable intervals and with varying intensity. Or more succinctly P(NBooWfKRR)>0 | Nk>0 where NBooWfKRR=Need to Be out of Workforce for Kid-Related Reason and Nk (sorry, that should be a subscript) is the number of kids you have. I’m open to including Aging Parents as having the same sort of causal effect, somewhat consistent with your expectations, though I suspect you mean younger kids/parents than what I mean by Aging Parents and … sure. But even your kid helping you requires parenting of a hands-on/present sort (on average) until they (or you) reach a “certain age.”

  4. Cloud Says:

    This is a great post. As someone who works in a volatile field under the constant risk of lay offs… I have to agree, it IS a lot less stressful to be laid off when there is a second income coming in to help keep the household afloat. Even so, we keep a buffer equal to 5 months’ expenses (we want it to be 6 months, but not enough to stop doing things like going on vacation, so I think we should just admit that 5 months is our actual goal- if it dips below that, we’ll stop spending until it goes back up).

    Having two incomes (and a hefty buffer) also reduces job stress when we’re both working- neither of us feels trapped in our jobs. If a job starts sucking, we know that we could just walk out. So far, neither of us has ever done that, but just knowing that the option is there is nice!

    Also @bogart is right that you have to consider the extra expenses of having someone at home during the day. I notice this primarily in the little things: we go through more toilet paper. If it is me who is at home, we go through more fizzy water (my preferred drink). Etc.

  5. oilandgarlic Says:

    Great post. I hate it when parenting mags/blogs talk about the whole income vs. daycare costs and never factor in lost opportunity/lost wages. If you have a 2+ year gap, you not only lose out on raise and promotions, you are not really as employable and you also lose out on investment returns (i.e. the money you could have invested in a 401k or 403b). And you often drop out during your prime earning years if you quit later in life. Most women I know had kids older and are unable to return to the workforce due to rusty skills and ageism, although their decision to quit had more about hating their jobs than money. I don’t criticize other people’s decisions but let’s just be honest with ourselves…

  6. priskill Says:

    I have done both and the short answer for me is — there is no short answer, unless you are an ideologue on either side of the equation. I loved being home with my daughter up to 8 or so and then working my way back into the workforce, but I would never prescribe (proscribe?) for others. Seriously, what work WORKS. There is no one way. Certainly, you sacrifice money, job security, personal job growth, raises, etc., to stay home, and you sacrifice some of mommy time and flexibility of the SAHP — but as you astutely said, “it’s not a bad thing or a good thing –it’s just a thing.” Bravo! Especially appreciate the statistics that show how children in day care are NOT hurt, and bond with their parents, etc. We seem to renew this argument every 10 years or so, regardless of the facts. Sigh.

    This is such an emotional issue for folks so I really appreciated the calm outlook here.

  7. Anandar Says:

    One mistake I feel new parents sometimes make is to look at the (very very) high cost of infant care, and then extrapolate that out five years when trying to figure out whether it makes financial sense to SAH. Options expand and costs decrease the older a child gets– in my high cost of living area, it is the first 18 months (minus any paid parental leave time) that is really the kicker. After that things get a lot easier. From a financial perspective, at least, it may be better to suck it up in the short term than to off-ramp a career for what is really a relatively short period of super high expenses.

    I’m lucky to work 80%, and in addition to the work-life balance benefit, I love the financial independence that gives me– I know that in a pinch, my employer would be happy for me to ramp back up to full time, but our lifestyle and retirement plan don’t depend on it.

  8. femmefrugality Says:

    Wow, what mean relatives you have. I think it’s wrong to judge either way. Every situation is unique. I love Anandar’s point. So true. Emotions have a lot to do with it, too. If you love your job and working makes you feel fulfilled, going might be the thing that helps keep you sane after all day gooing and gahing as your mind turns into that play-doh you’ve been playing with your kids with all day. If you hate your job, you’re more likely to feel guilty and get depressed about not being home with your kids all day. For most people I think the cost of daycare vs. the extra salary is not going to make that big of a difference. (If it does for you, rock on!) That makes the decision way personal. I say whatever’s going to make you happy and therefore healthy, physically and emotionally, for your child.

  9. Comrade PhysioProf Says:

    There is a social control element here, which is that there is a tremendous social incentive for men to “allow” their wives to stay at home, and for their wives to “enjoy the luxury” of staying at home. With their wives safely out of the workforce and becoming less and less employable by the day, the men then have a lot more breathing room to be gross assholes and not lose their wives (aka, unpaid childcare and houskeeping servant). My sister went through this shitte, her husband was such a f*cken douchebagge she got divorced anyway, and now at forty years old is trying to raise three young children and figure out how to support herself and her kids with minimal paternal child support and no marketable job skills.

    The risks of allowing yourself as a grown adult to become completely financially dependent on another person cannot be overestimated.

    • nicoleandmaggie Says:


      Another reminder: Don’t marry a douche!

      Though nobody probably intends to marry a douche.

      • nicoleandmaggie Says:

        Douche happens: Be prepared!

      • Comrade PhysioProf Says:

        Srsly. In retrospect it is clear that my sister’s husband did everything he could to ensure that she was as financially (and otherwise) helpless as possible. Also in retrospect, and quite sadly, it is very clear that my parents also did everything they could to the same end, in highly complex and strategic ways the specifics of which cannot be gotten into here (for obvious reasons). Patriarchy f*cken suckes shitte, cheapening and coarsening and sickening all that it touches, which is, of course, everyf*ckenthing.

      • nicoleandmaggie Says:


        Also: I can’t believe Nature is doubling down on its misogyny. WTF?

  10. Jacq Says:

    One thing I don’t understand AT ALL with some bloggers is where you have a SAHM (usually) and a WOHD (work out of the home dad) that is putting in 80 hour weeks. How is that better for the kids just because one is home? In my ideal utopian world, there would be 2 parents working 25-30 hours a week each and being able to have a decent life on that kind of money. Maybe Sweden or France?

    My sister was a SAHM and I think it’s kept her in a somewhat not great marriage due to financial dependence. I don’t know but I think of all the reasons why you should stay in a marriage, hopefully financial reasons would be very far down the list.

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  13. save. spend. splurge. Says:

    I love this! This is so detailed and scientific. The equation, makes a lot of sense to me.

    I had a lot of kickback from my mom and even my brother about not staying at home with Baby Bun. I was quite peeved at the whole “you can’t leave your baby with strangers” mentality. Sure I can, I was raised by a nanny!!!!! :P :P Talk about the pot calling the kettle black.

    Anyway, what I was most annoyed about was being told that as the mother, I had to stay at home. Why not the father, I asked? They kept quiet but silently judged me for saying so.

    I don’t see why I have to give up a whole year of my life to take care of a child when I make good money and also love my job. I can give up 3 months – 6 months depending on how long my baby needs, but not any longer than that. I’m already going stir-crazy.

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