September 30, 2022 12:34 am
September 30, 2022 12:34 am

What’s the Salary of a Stay-at-home Dad?

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I lovingly refer to my daughter as an “Agent of Chaos”. As a toddler, she is constantly on the move exploring her environment. Whether she is opening every available cabinet, pulling dirty diapers out of the bin, or trying to slurp water out of our dog’s bowl, she exists to create chaos. For any parent who has or has had a toddler, my statement likely comes as no surprise. Gone are the days when I could simply swaddle her and lay her down for an hour nap. In hindsight those were the easy days. Now I’m reminded of how much work it takes to raise a child.

In the rest of this article, I’ll cover the costs my family has incurred for childcare, how being a stay-at-home dad changes those costs and touch on a couple of the factors that are more difficult to put a price tag on. While my perspective is that of a stay-at-home dad, the vast majority of this article is relevant to any parent. I hope you find this useful!

Daycare Costs

When I lived in Wisconsin, I thought childcare was expensive with full-time childcare running between $1200-1600 per month. Knowing my original 30-year mortgage cost me all of $1500 each month really put that figure into perspective. Even in the Midwest, childcare ain’t cheap. So, when my wife and I started exploring full-time daycares in the Bay, we nearly had a heart attack. Center after center posted rates of at least $2000 and well-reviewed daycare easily topped $2400!

With my wife working and me going to school full time, we’d normally be facing a reality of serious student loan debt to finance my education. Thankfully my rich Uncle Sam (US Government) provided a very generous GI Bill for veterans returning to school. So instead, we were able to use the entirety of the housing allowance to pay for childcare. Thankfully I wasn’t a single parent or else I’d be in a real rough spot!

Daycare Savings

When I was home for winter break, I had the realization that our current living situation was equivalent to living on a single income with a stay-at-home parent in the Bay Area. We were still paying for childcare monthly through the university but over break, I was the sole provider of childcare, and my housing allowance almost exactly matched our daycare payments. Surprisingly life in the most expensive metro area in the United States was more affordable than I thought. How could this be?

First, my wife is a nurse which is a profession that pays competitively in California. Given the high cost of living, hospital systems will often pay wages of $140,000 or more for experienced hires. Contrary to many parts of the United States, this is considered middle class here in the Bay Area.

Second, with one parent home we can save on childcare costs. By not placing our daughter in daycare, we save a whopping $2570 per month in childcare costs. Over the course of a year this amounts to over $30,000! What’s more is that most of this expense is paid for in after-tax dollars. While it is true that you can pay for childcare with a Flex Spending Account to reduce taxes, this benefit has a cap of under $3,000 for 2022. By providing childcare in house, I give myself a tax shield on the services we otherwise would have paid for. Assuming a household income of $140,000, we will be in the 22% tax bracket at the federal level and the 9.30% bracket for the state of California. At these rates, I would need to earn almost $45,000 to cover the same expenses! Even though our taxable income remains at $140,000, my contributions give our family an income equivalent to a two-income household making $185,000.

Goodbye Commute

In addition to eliminating childcare costs, then I would also ditch a 20-mile commute. Even in a hybrid work scenario where only two days a week are in the office, eliminating this commute is still a significant savings. The 20 miles realistically takes at least 45 minutes each way, so the cost isn’t simply the operating costs of the vehicle but also the costs on your time. First, let’s calculate the direct costs.

At a government rate of 58.5 cents per mile the direct cost reduction of my expected commute amounts $6,084 annually. In addition to the direct costs, I would also save the indirect costs of time spent commuting. At 90 minutes twice a week, the toal commuting time costs an additional three hours per week. Knowing that my time is now already worth at least $54,000 a year between the childcare and direct commuting costs, I can calculate my indirect costs at $26 per hour. At three hours a week, the time commuting adds an indirect cost of $4,000 annually.

Total Economic Savings and Dual Income Parent Penalty

The joy of being with your kids aside, the first stay-at-home parent in a high cost of living area adds a total economic value of $58,000 to the household. Combined with the daycare savings above, a single income household with a kid could be significantly better off than a dual income household of the same income.

ChildrenSingle IncomeDual Income
1Parent #1: $140,000
Parent #2: $58,000 in cost savings
Total: $198,000
Parent #1: $80,000
Parent #2: $80,000
Total: $160,000
2Parent #1: $140,000
Parent #2: $97,000 cost savings
Total: $237,000
Parent #1: $110,000
Parent #2: $110,000
Total: $220,000

If you’re currently in a dual income household but haven’t considered moving to a single income due to financial worries, then it could be worthwhile to draft a budget. Once you factor in commute costs and taxes, the difference might be smaller than you anticipated.

Additional Benefits

In addition to the financial components of being a stay-at-home parent, there’s also:

  • More time with your kids. Most of the time that you spend with your kids will be during their first 18 years so any additional time you can spend when they are young is even more valuable
  • 1:1 Time. If you send your child to a center, then a single teacher might watch four or five kids at a time. In contrast, with only one or two kids at home it is possible to provide individualized attention to help your child develop more quickly. You can even pass on knowledge that might not be prioritized for young kids because it’s never too early to start learning about personal finance!
  • Time to work on a side hustle. As a stay-at-home parent there are opportunities to pursue freelance work, photography, or writing as you have time. The flexibility to do these times at odd hours in the early morning or late evening isn’t possible with a traditional job but allows you to continue caring for children and providing extra income.

For parents interested in maximizing parental leave policies, it’s also worth noting that the leave policies are more generous for women (as they should be) so an arrangement with a woman as the primary earner can result in a greater total time with both parents at home than an arrangement where a man is the primary earner.

Even if you determine that it doesn’t make sense for you to be a stay-at-home parent, it’s still worthwhile to see if you can arrange for some type of remote work opportunity. The WFH Movement is likely here to stay and there are numerous opportunities in the current job market. Taking advantage of WFH flexibility can save you commute costs in time and money and reduce the amount of office space that your employer needs to maintain. It’s a win-win!

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