Does having a second income really pay off?
Does it pay for both parents to work when the kids arrive or for one to stay home?
Well, lifestyle issues aside, there's clearly no right or wrong answer -- but it does pay to do the math, says Andy Dappen, author of Shattering the Two-Income Myth.
Some of his numbers are a bit dated for this economy, but the exercise is certainly worthwhile, maintains one stay-at-home mom, who blogs at On One Income, and concludes that the few extra dollars just weren't worth it.
When considering whether two paycheques will pay off, you have to figure out how much of the lower earner's salary will be eaten by dual-income expenses.
For instance, the "working tax" on a second income includes childcare costs, work-related expenses, lost perks, and additional household costs. You may also find yourself in a higher tax bracket where you end up giving the government a bigger percentage of your overall family income.
Unless you live in Quebec, where full-time day care costs is heavily subsidized, you’re likely looking at something like $200 a week per child in the large metro areas -- a cost The Economist expects will escalate here as it has in the U.K.
Also, take into account the costs of going to work; the commute, the clothes, the dry cleaning, the lunches -- all of which can add up to several thousand dollars a year. Of course, with so many people already working from home, this may not be as onerous as it once was.
As well, regardless of which parent is the one waving goodbye, the-stay-at-home decision often morphs into a second vehicle for errands and transporting the kids.
If you need help crunching all these numbers, try this tool. This is a U.S. calculator, however, and one big difference there is the way married couples file their tax returns. But the overall expense data should track reasonably well.
Otherwise, here's a stripped down Canadian version.
Is being a dual income family paying off on your house? Or do you even have any choice in the matter?
By Gordon Powers, MSN Money
Posted by: John | Feb 12, 2022 4:50:04 PM
There is much more to this than just money, and this article is especially being short-sighted. When my wife and I were still young, we were in the situation where it may have been better financially for my wife to stay at home, as I was the higher income earner. After income tax, cost for baby sitter, we were behind. This was short term, meaning a few years. My wife stayed employeed outside the home, and developed her carreer and expereince in her field of expertise. Now that our kids have moved on, pursuing their higher education and careers, we are much better off financially, with both my wife and I earning very high incomes. Had my wife stepped away from her career and not developed in her profession, we would not be as well off today financially. For my wife, she would not have been as fulfilled professionally.
Posted by: Al | Feb 15, 2022 12:12:03 AM
Why do people even have children if you don't plan to raise them yourselves? This is simply passing the buck, no wonder why so many people are screwed up and our society is in social decline.
Posted by: rf | Feb 15, 2022 12:47:44 AM
back in the early 1990s, we found that the first $thirty grand (of the second income) = ZERO net benefit
I stayed home with the two kids and we paid the mortgage off in 10 years.
the higher income spouse gets to deduct the lower income spouse = tax savings
When we added back the GST credit, child tax benefit and the working poor supplement, and factored in child care costs of ZERO, plus ditched the second car for the second income earner, we found the benefits of a stay at home parent were FAR better than the second income.
Gross income of $40k grand, take home pay was $45k, income tax payable was ZERO, it was because we were considered POOR by our canadian government, they sent us bigger baby bonus, AND the working poor supplement on top of the baby bonus... that is how we took home more than our gross pay,
Life was simple, the house was clean, the kids were well looked after, and we STILL paid the mortgage off early..
and by the way, it was the accountant dad who did the math and changed the diapers.
So there is a definite NO Brainer... when the kids are young, one of the parents should stay home...
we did not have kids, so that someone else could raise them.....
Posted by: M. | Feb 15, 2022 10:32:11 AM
There is a third scenario that needs to be looked at when it comes to the kids/ work balance and that is for BOTH parents to be EQUALLY involved in actually raising the kids, looking after the house and having a career. I don't want to generalize, but all too often after the first five or six years, it isn't just the child-rearing that keeps one partner at home, it's the fact that they were doing the majority of the housework and errands as well. THAT's what makes having a 'real' job difficult after those first few years.
The reality for many women , even those who thought they were still keeping their work skills up-to-date, is that their career (and not even what you'd think applies just to those 'high-powered professions ) goes downhill FAST.
Throw in a divorce and you can spell financial disaster for the stay-at-home partner.
Been there..... still living it. I stayed home to raise the kids and now I can barely keep a roof over their heads. Oh... and I will never retire at age 67 ... assuming that I'll ever get a decent job again.
Posted by: Alice | Feb 15, 2022 10:40:06 AM
Hi. Well "rf" sums it up for my family. I stayed home to raise the kids, while my husband went out to work. The big disadvantage was losing MY identity, through my profession at the time. However, I have never regretted giving up my career as I believed (and still do) that parents should raise their own kids and not ship them off to daycare. Financially speaking it was tough at first, but now we seem to be just as well off as those making twice as much money as my husband at his work. Why? They are giving up so much of their paycheck to income tax/taxes. Like "rf" says, we are considered poor by our government. It works for us. Lastly, I gave up the second vehicle early on in the marriage, as we just couldn't afford it. However, everyone in our family has learned to walk everywhere or take city transit. (My husband is the only one in the family with a vehicle.)
Posted by: RH | Feb 15, 2022 4:06:43 PM
Hi. I am a stay-at-home Mom who made the choice to stay home after my 2nd daughter was born. We weighed the pros and cons of me working and it wasn't worth it especially for how much I was making. It has been hard losing my identity as pointed out by Alice. You tend to define who your are by your profession. But that shouldn't limit your self. I am now at the point where I want to contribute to society as a working professional. It's just a lot harder to get back into the workforce when you have been out of it for 2 years. Let's hope our economy starts to pick up so that we can all afford to live our lives the way we want.
Posted by: alfred watson | Feb 15, 2022 4:44:21 PM
Kids AND two jobs do not mix.
Even with today's Dads doing an average of eight hours per week of bonafide household chores while the wife/spouse does eleven (stats Canada) there is never enough time for the family. Also, having someone else raise the kids means YOUR kids develop socially and intellectually as imprinted by a relative stranger. Add to this the very real possibility your kids will be molested by a caretaker leaves no room for discussion.
Have kids - someone needs to stay home. Thats my two cents worth as an old geezer. What do I know??
Posted by: John | Feb 15, 2022 7:23:02 PM
@ Al and Alfred Watson... kids and 2 jobs does work! It worked for us and EVERYBODY that I know. I see far more messed up kids from families with a stay-at-home parent. My children WERE raised by me and my wife! Having a nanny at home looking after then during the day does not mean we are passing the buck. By the way, my children are adults now, my son a commissioned officer in the air force and a mechanical engineer, and my daughter a doctor. We paid 100% for their education. So much for your short-sightedness on dual income families! Grow up!
Posted by: alfred watson | Feb 15, 2022 9:11:58 PM
Hey John,
Sorry I struck a raw nerve. Your Nanny probably did a TERRIFIC job with your kids.
I wonder though, where EVERYBODY you know has the dual income and kids how can you see mixed up kids from the single income home?? Or are they people you DON'T know? Can't have it BOTH ways, guy. Personally, I see some good in most everyone.
I think, too, that some parents feel guilty no matter how good a job they did with their kids. Some very good parents HAVE to work outside the home for reasons various and sundry; some feel a real need to stay at home. Results vary no matter which way they choose. But kids AND two jobs is, in my opinion, a no win situation.The much touted efficient, effective, multi tasking, go go go with the quality time hypothesis just shorted everybody. But thats only my two cents worth. What do I know??
Oh, by the way, I hope the Nanny taught the kids a bit of tact and diplomacy John. They may find people in life who are all grown up and still have an opinion different from their own. Happens sometimes.
Cheers, John, I have to get some shut eye. Work again tomorrow, you know.
Posted by: JM | Feb 15, 2022 10:38:16 PM
We have tried both - two incomes and one parent at home. Although we had a fantastic nanny, it can be very hectic with young children and two working parents. We found that our weekends were being used for errands and we had very little quality time with the children. My husband has been at home for the last three years and the weekends are family time with fun activities rather than grocery shopping. But, he will need to return to the work force if he wants to maintain his career.
If I can give any advice to parents faced with the same decision, I would recommend one parent staying home when the children are young (pre-school). It is the time when the childcare fees are the highest, and the children need a lot of assistance. But I would then return to a two income family so that the stay at home parent can resume their profession, talk to adults, and build financial savings. Perhaps knowing that your time at home is limited allows you to appreciate it.
Each family must decide what is best for them. Best wishes.
Posted by: Alice | Feb 16, 2022 12:00:34 PM
JM, the problem with your theory of waiting FOUR years until the kids start kindergarten, is by that time your profession has MOVED ON without you. In effect, you WILL have to start all over again. Your choices are to: #1. Let your profession go (which I did) because as a parent you believe that raising your children are indeed more important than that career. OR #2. Go back to work after TWO or THREE years and have your kids, very fast, and of course, close together. My husband's job is training new employees, and he says there is a real problem with trying to get women BACK IN the workforce AFTER maternity leave, even if it is ONLY 4 or 5 years. 4 years IS too long to be OUT of the workforce. You have now become a liability to your company instead of an asset.