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As a stay-at-home parent, financial difficulties may cause you to wonder if returning to the workforce would be a good way to bolster your family's finances. Before you start your job search, however, take time to assess the financial pros and cons. To decide whether going back to work makes financial sense, you'll need to weigh child-care costs and new expenses against the salary and benefits you'll receive.
What Are the Costs of Going Back to Work?
Returning to work may mean new expenses including:
Child Care
Nationwide, the average cost of day care for one toddler at a child-care center is $226 per week, while a nanny averages $694 per week, according to Care.com data. And child care can cost much more in some areas: In California, for example, the average cost for one infant to attend a child-care center is $17,384 annually. Costs decrease as children get older, but depending on how many children you have, the bulk of your second income may go to child care.
Pet Care
Dogs left alone all day can develop behavioral problems, but a dog walker or doggy day care helps keep Fido fit and happy. Dog walking costs an average of $20 per walk, according to Rover.com. Day care services for dogs run an average of $29 to $38 per day, although weekly or monthly packages are typically cheaper.
Transportation
Whether you drive or take public transportation, be sure to factor in costs such as transit fares, fuel, maintenance and parking. Drivers whose annual mileage increases due to their new commute could see car insurance rates rise, too. The average annual cost of commuting ranges from a low of $5,244 in New Orleans to over $12,000 in Washington, D.C., according to data from Clever Real Estate.
Clothing and Personal Care
Entering even the most casual workplace likely means upgrading from your stay-at-home wardrobe. A new work wardrobe may even need to be maintained with dry cleaning. More frequent haircuts, hair color appointments and new cosmetics may also be in order. While clothing costs vary widely depending on your job, women on average spend 40% more on clothing each year than men, according to the Bureau of Labor Statistics.
Food
With the cost of lunch items rising faster than any other kind of food, according to a survey by Square, American workers are experiencing what's being labeled "lunchflation." As of March 2022, Square found costs increased year-over-year for sandwiches (14%), wraps (18%) and salads (11%). Daily gourmet coffees add up, too. If you and your partner are too tired to cook after long days at work, you might end up ordering takeout more often.
Taxes
A higher income could put you in a higher tax bracket, costing you more at tax time. Consult your tax preparer or use tax preparation software to estimate how a second income might affect your tax liability.
Benefits of Going Back to Work
Tote up these financial benefits of returning to work:
Salary
In addition to helping cover inflation costs, a second income could help you save for financial goals such as buying a home or putting children through college. Your debt-to-income ratio may also drop, which could make it easier to qualify for a mortgage or other loan or refinance existing loans.
Career Advancement
When you have young children, having both parents in the workforce can seem like a financial wash. But even if most of your second income goes for child care, working can help you stay current in your industry, advance in your career and ultimately earn more money over your lifetime. Keep in mind that once your children are in school, child-care costs diminish.
Health Insurance
Getting employer-sponsored insurance may be one reason to go back to work. On average, premiums for employer-sponsored health insurance were $22,463 for a family in 2022, according to the Kaiser Family Foundation, with employers covering everything except $6,106 of that. If your family has health insurance through the public health insurance marketplace, know that a job offering health insurance typically makes you ineligible for a marketplace plan. Because tax credits and cost-sharing reductions can drastically lower the cost of marketplace plans, an employer-based plan might cost more than a marketplace policy. Talking to an insurance broker familiar with the marketplace can help you determine what makes the most sense.
A Retirement Plan
An employer-sponsored retirement plan can boost your long-term savings significantly. A 401(k) plan's annual contribution limits are more than triple the limits for the individual IRA a stay-at-home parent may have. What's more, some employers match a percentage of your 401(k) contributions, letting you save the same amount while investing less of your own money. If you earn $50,000 annually and contribute to an employer-sponsored 401(k), taking just one year off work could cost as much as $106,469 in retirement savings over a lifetime, Fidelity reports—which means going back to work could earn you the same amount.
Other Benefits and Perks
Many employers offer money-saving benefits such as:
- Group term life insurance and disability insurance
- Health savings accounts or flexible spending accounts allowing you to save money tax-free for qualified expenses
- On-site gym or free gym membership
- Discounts on products and services such as homeowners insurance, cellphone plans or appliances
- Help repaying student loans
- Financial assistance with child care or commuting expenses
- Reimbursement for costs associated with a college degree, job-related certification or training
How to Budget for Your New Lifestyle
Once you re-enter the workforce, sit down with your partner to review and revise your household budget. It may be tempting to splurge on clothes, meals out or vacations now that you have two incomes. Beware lifestyle creep, but be sure to build some of these "treats" into your budget. Your budget should also include a plan to set aside money for long-term financial goals such as building an emergency fund, saving for retirement, making a down payment on a home or financing children's college funds.
You can also look for ways to save on the new expenses that come with a job. For example:
- See if family members can provide child care, or consider hiring a nanny and splitting the cost with another family. Ask whether your employer offers any child-care benefits, such as discounts at local child-care centers.
- Tax savings can also reduce child-care costs. Some companies offer dependent care flexible spending accounts you can use to save money tax-free for qualified child-care expenses. The Child and Dependent Care Credit allows you to deduct the cost of work-related child-care expenses for children under 13 on your income taxes, up to certain limits.
- Build a work wardrobe by swapping clothes with friends or buying from thrift stores or resale sites such as Poshmark, Thredup or eBay. To avoid wasting money, clarify your employer's dress code and see how your co-workers dress before you shop.
- See if your employer offers a rideshare or shuttle or reimburses your commuting expenses. Look for other employees to carpool with.
- Consider using rewards credit cards for job-related expenses, such as gasoline, lunches or clothing, to help recoup some of your costs. Just don't get carried away and overspend to earn rewards. Building up a balance you can't pay off could cost more in interest than you earn in rewards.
The Choice Is Up to You
Only you can decide if returning to work makes sense for you. Maintaining good credit can boost your family's finances by making it easier to access loans and credit at lower cost. Whether working outside the home or not, every parent is busy. Sign up for free credit monitoring and let Experian keep tabs on your credit while you focus on what really matters: your family.