Tuesday, October 31, 2006
This article in USA Today discusses the issues of the cost of child care. I believe that you do get what you pay for... however, we cannot ignore that quality child care is expensive.
Growing family on one income?
By John Waggoner, USA TODAYWith every new arrival in your family come lots of dizzying choices. Cloth or plastic diapers? Pink or blue layette? But the toughest decision is whether one of you should leave your job to care for your child.
If one spouse stops working, can you live with a lower income and, if possible, continue to stash money into a retirement account? It's often not easy. But if you're willing to cut your budget, staying home with your child might not be as financially painful as you think.
The big question... If you want to stay home with your baby, are you willing to put your career on hold? The question isn't hard if you don't like your job, or if you can take time off easily and return five years later. If you're on the brink of rediscovering Atlantis or if you simply love your job, the choice is much harder.
Even if you hate your job, you will suffer some financial setbacks by leaving it. You stop accruing credits toward Social Security benefits, for example. You forgo several years' work experience — years that generally translate into higher pay over time. And you lose pension benefits, as well as the opportunity to contribute to a corporate 401(k) savings plan.
The impact of losing one income might not be as huge as you imagine. "There's a myth out there about how much income a second job is producing," says James David Ashby, a financial planner in Magnolia, Ark.
There are also downsides to dual incomes. A second job might lift your family into a higher tax bracket. If you commute a long distance, the cost of gas and car repair can be considerable. A daily coffee at Starbucks on the way to work will set you back $60 a month.
And if you continue to work, you'll have to pay for day care. The average cost of infant day care is 10.6% of household income, according to the National Association of Child Care Resource and Referral Agencies, a trade group.
For low-income families, that can soar to nearly a quarter of household income. The cost of child care depends on where you live. In New York state, the average cost of putting a 4-year-old in full-time preschool is $8,530 a year, or 11.5% of the median income of two-parent families in the state. (Median means half are higher, half lower.)
And even if you live in an area with low-cost day care, you might still have to pay a big chunk of the family income for child care. In Mississippi, for example, you can expect to pay an average of $3,904 a year for day care. But that's still 27% of the median single-parent income in the state.
Of course, the more money you make, the less trouble you'll have paying for day care.
