Everything changes when you have a child.
No, we're not talking about the late-night feedings, the sleepless nights of crying, or the (hopefully) temporary disappearance of your social life. We're talking about your financial life.
You may have had a plan going into the final months before your child was born. If both you and your spouse work, you might have planned for both of you to be back to work within a month or two after your child's birth. Yet when your child actually arrives, you might catch yourself thinking about other possibilities.
Smart economics
From an economic perspective, your first instinct is probably that you'd be a fool not to go back to work. After all, you've gotten used to having two paychecks to support your lifestyle. Now that you face the expenses of raising a child -- which some sources estimate at $10,000 per year or more -- it hardly seems like the time to cut your income voluntarily.
When you're considering the question of whether or not to have one parent stay at home, however, you have to think about both sides of the equation. Although staying at home will reduce your family income, it may also save you a ton of money that would otherwise go toward daycare expenses. Depending on where you live and the level of involvement you want from a nanny or other childcare professional, it's not unheard of to pay upwards of $1,000 per week for the type of full-time care that you could provide free of charge if you chose not to work. That might be plenty of incentive for you or your spouse to stop working.
Opportunity cost
On the pro-career side, the cost of giving up your job to stay at home is more than just the salary you lose. In many cases, you're also sacrificing your prospects for future job advancement. Although explicit gender-based employment discrimination is illegal, labor laws haven't stopped some companies from treating employees who choose families over career opportunities with a degree of skepticism. And while women still face the brunt of such discriminatory practices, men increasingly face the same issues in deciding whether or not to take advantage of paternity leave under the federal Family Leave Act.
Luckily, some companies recognize the value of workers with families. Many large companies, including Microsoft
Intangible benefits
Of course, deciding whether or not to stay home with your new child is much more than just an economic decision. Ideally, you wouldn't have to factor finances into your decision at all. But for most of us, practical reality demands that we think about money matters.
By working together with your partner, however, you can reconcile the emotional needs of you and your child with the pragmatic considerations and come up with a solution that will work for everyone. If you consider all the options, you may find that making a good decision is easier than you thought.
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- Why you shouldn't listen to Jim Cramer.
- Forget the headlines. Invest anyway.
- Get to know your IRA.
