Should my wife work or stay home?

October 26, 2015

For many families, the expense of adding an additional member oftentimes brings up the question of whether or not it makes financial sense for one of the spouses to continue working or to stay at home to care for the children.  When both spouses make a high income, it usually makes sense for both spouses to work and utilize child care services because the lower earning spouse's income exceeds the cost of child care.  However, when one spouse doesn't make a high income, it's in your best interests to examine the trade off and determine if it makes sense for him/her to work or to stay at home. 

Consider this.  My youngest child attends a daycare facility which charges $405 a week for childcare.  If we were to multiply this figure by 52 weeks in the year, that's a tad over $21,000 in after tax expenses.  If we were to factor in 25% for taxes (ie Soc Security, Medicare, Fed Tax Withholding, State Tax Withholding, State Disability), the break-even point is roughly $28,000 per year, meaning if my spouse earns a pre-tax income of $28,000 or more annually, it makes sense for her to work.  If she is earning less than $28,000 per year, it makes more sense for her to stay at home (because the cost of child care is greater). 

However, I have two children.  My oldest attends pre-school at a rate of $1335 per month (or a tad above $16,000 per year) in after tax expenses.  If we were to factor that same 25% for taxes, my spouse needs to make an ADDITIONAL $21,000 per year in pre-tax income.  Adding up the two figures for both kids, my spouse would need to make an annual income of at least $49,000 for it to make financial sense for her to work.  An income less than $49,000 means that it costs us more to put both kids in child care.

Keep in mind that this is only a starting point in determining whether or not it makes sense for a spouse to stay at home because a stay at home spouse taking care of children can also mean additional expenses to feed and entertain the kids, costs which are already included in the child care expenses.  Additionally, the benefits of child care -- social interaction with other children, learning opportunities, time away from the child/children to decompress -- may far outweigh any costs in your personal belief system. 

Contact me for help in determining which option may be appropriate for your situation by emailing me or calling me at (949) 221-8105 ext 2128. 

About Mike Loo

Mike Loo is an independent financial advisor with more than 20 years of experience in the financial services industry. His mission is to provide a meaningful impact on the lives of clients and the people they care most about, help them make educated decisions with their money, and build a strong financial foundation for both themselves and their next generation. Mike is committed to meeting a high standard of excellence, taking the time to listen to clients’ needs, and designing strategies that aim to help clients save money and reduce debt. He seeks to fit a client’s investments into their life and educate them so they’ll understand their investments. To learn more about how Mike may be able to help, connect with him on LinkedIn, call his office at (949) 221-8105 x 2128, or email him at

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Trilogy Capital, a registered investment advisor. Trilogy Capital and Trilogy Financial are separate entities from LPL Financial.