When you bring a child into the world, there’s a flood of emotion and an overwhelming sense of responsibility. Questions arise as you begin to embrace your new life. How do you decide what’s the best long-term childcare arrangement for you and your family? Should you go back to work, or stay home to care for your child?
While everyone’s particular situation is different, you can apply some critical steps to arrive at the right answer for your family. In this post, we’ll look at the key factors to review before committing to either staying at home or going back to work. And because this is real life, not an economics textbook, we’ll look at both the hard numbers as well as the less quantifiable, emotional and social considerations.
Considering Benefits in 2016
Begin your approach to the question with a review of the numbers. All critical decisions in life are guided by our personal finance profile; this should be no different. The question of returning to work is often, “can I afford to stay at home?” There are some great resources to help defray the cost of a child.
Forgoing a salary to stay at home can be unnerving. Evaluate your income from the Canada Child Benefit program. This recently-revamped mandate offers simplicity and value. Those who earn less than $30,000 and have a child under six will receive a maximum benefit of $6,400. These benefits carry on as your child grows up. For each child between 6 and 17, the parent will receive $5,400 a year. The payments are broken into monthly instalments and are completely tax-free. A useful benefits calculator will determine your specific payment. This plan is new as of 2016 and will have 9 out of 10 Canadian families receiving more than they did under the old plan.
A Better Way to Estimate Costs
Get a clear estimate of what childcare will cost if you return to work. There are plenty of statistics to help you understand the real numbers. It’s worth taking the time to do this right because child care costs in Canada range from $152 a month (Quebec) to $1,676 (Toronto). The cost of care is front-loaded with the greater expense coming early and gradually tapering off, as your child gets older. Your place of residence will have a considerable influence on what you can expect to pay. On average 4% of a woman’s income in Gatineau, Quebec goes to child care. In Brampton, Ontario it’s 36%. When making your decision consult the excellent cost by city data provided in the latest survey of child care cost in Canada.
The maximum EI benefit for maternity leave is 15 weeks, and 35 weeks for parental benefits. The Canadian Centre for Policy Alternatives reports that “Among mothers who were employed before having a child, 90% took parental leave for an average of 44 weeks after the birth of their child.”
You may also want to consider future costs. For example, how important is it to you to save for your child’s education? Can you afford to contribute to an RESP for your child on one income?
Understanding Tax Implications
There are tax benefits for families that you should consider in your financial review. Costs that are not covered by Medicare like prenatal care can be claimed on your tax return. Additionally, the family tax cut credit can work to your advantage. Those who are eligible and have one child, or more, under the age of 18 can move up to $50,000 of taxable income away from the highest earning spouse to the lower earning spouse. The maximum credit permitted is $2,000. The CRA offers a wealth of information on this benefit.
Consider the full range of benefits and savings before committing to a final decision. If you’re eligible these programs and provisions can substantially change the year-end numbers for a family. If you want to be home with your child but the raw costs are prohibitive take a closer look at how these tax benefits might change the game.
Considering The Social Implications
The numbers matter but so does the psychology. No one understands a child better than the parent. However, there have been many comprehensive studies designed to examine how a child at home develops compared to one at a daycare. The National Institute of Child Health and Human Development (NICHD) Study of Early Child Care reached some insightful conclusions. The authors report that “Children 6 months of age and older who had more experience in child care centres showed somewhat better cognitive and language development through age 3 and somewhat better pre-academic skills involving letters and numbers at age 4½ than children with less center-based child care experience.” This data is important because so many parents wonder how the presence or lack of a social environment without the parent will influence later development.
The study also yielded insights on the negative aspects of child care outside the home: “center-based and large-group settings are also associated with more problem behaviour just before and just after school entry. these types of care are also linked to more ear infections and upper respiratory and stomach illnesses during the first 3 years of life.” Take stock of what’s important to you and review the rich data within the study.
Think about the choice first with your head, then with your heart; both matter but rarely do they agree completely. It is a choice to be made in full solidarity with your partner so that the commitment is shared. A stable home and a loving support network are the ultimate factors at play.
