There are many pros and cons of being a stay at home parent. This is what they tell me anyway, for I wouldn’t know: my wife and I both work full time (or nearly so, as I am officially at 90% FTE). But having a child in daycare for the last 7 months has made me ask a lot of questions. Generally speaking we are quite happy with the arrangement, but I have wondered about those pesky childcare expenses that are coming in at $1340/month. Yes, for all you DINKs out there, that is $16,080/year for one child in daycare. And that is down from the $1500/month we were paying up until a month ago when he was in the “up to 18 months” room, and less than you pay in other Ontario cities.
So, as you can imagine one question I have been asking myself is, ‘Should I be a stay at home dad?’ While there are many good reasons to considering staying at home with the little one, today’s question will focus solely on the financial side of the equation. And we will only consider me as the stay at home parent. After spending her whole life in school, my wife finally got a job and immediately surpassed my earnings about 3 times over. Suffice it to say that at this point we are not considering her for the stay at home role.
When I found out how expensive daycare is, my initial assumption was that it would likely make sense for me to stay home. We were paying $1500/month at the time, and my take home pay is $3400: more than 44% of my monthly pay was going to daycare. And that does not include travel time and costs as I needed to drive him. But then I learned that there is a tax deduction for child care expenses, and up to $8000 is eligible. With this factored into the equation, I realized that I need to crunch the numbers to get a better sense of the finances around childcare, so that we can make an informed decision.
Here are the numbers: My take home pay is still $3,400. But I also recently remembered that there is an additional $650 a month benefit coming my way via RRSP contributions ($500) and the tax refund for said RRSP contribution ($150). So, me working is worth more than $4,000/month. The monthly cost of daycare has since dropped to only $1340/month now that our son turned 18 months. At my spouse’s tax bracket for 2017 (47.97%), the $8000 tax deduction is worth $3837. Which means that daycare costs are $12,243 once the tax deduction is factored in ($16,080-$3,837).
Taking all those numbers into account, the picture looks much more reasonable. We are paying out just over $1000/month for daycare. With me bringing in $4000/month (after tax and including RRSP contributions), the daycare costs are now roughly 25% of my income. Still a kick in the pants, but more palatable than the nearly 50% that I thought initially. And when I consider the flip side of the equation – the opportunity cost of not working – the picture becomes more clear. Me staying at home would mean $36,000 less in the bank at the end of each year. Our son loves daycare, and I like my job. So at this point, I don’t think being a stay at home dad is in the cards.
Do you have any children? Did you consider staying at home, given the high costs of childcare?