It’s a dilemma many parents wrestle with after having children: is it even worth going back to work? The question inevitably comes after calculating how much the lower earning partner would make after tax and the increasingly eye-watering sums of putting kids into full-time childcare.
Subtract the financial costs of commuting and lunches plus the emotional tax of early morning tantrums in the back of the car over lost shoes, the remaining sum on paper very often doesn’t seem worth the hassle.
Last month, Victoria Devine, creator of the influential Australian financial podcast She’s on the Money, told listeners: “It’s not worth going back to work if you’re earning 80,000 [Australian dollars] (€49,366) a year.”
She reasoned that after subtracting tax (lower in Australia where she is based than in Ireland) and full-time childcare fees for two children (higher over there), a mother would be left with only about €9,800 at the end of the year to show for it.
In family budget terms, it often makes sense to have the lower earning partner leave the workforce instead of sending the children off to be minded at high cost by strangers. The money saved from childcare stays in the family plus the tax advantages stay-at-home spouses create for their partners makes it all seem like a no-brainer.
But while it might benefit the family “on paper” for the woman partner to stay home in terms of taxes, childcare, budget and lifestyle, does it actually benefit her? And it does seem to be mainly “her” in the scenario.
According to Central Statistics Office (CSO) data, stay-at-home dads are on the rise (jumping 7,000 to just under 20,000 in a 10-year period). But, at 94 per cent, women still make up the overwhelming majority of the Republic’s stay-at-home parents.
The issue with questions like “is it worth going back to work if a mother is left with only €9,800 a year after childcare and tax” is that the calculations may not provide a full picture of a family’s money.
First, it takes the entire childcare fees out of her salary rather than splitting it across both parents’ incomes. Second, it doesn’t take into account benefits outside the mother’s immediate current salary that her job may offer. Things like healthcare, a company car, a pension, stock options, personal growth and career advancement.
Then there’s the thing no one wants to consider – what happens to a stay-at-home partner if a relationship dissolves?
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The “is it worth it question” clearly needs to go beyond the bottom line on an Excel spreadsheet, according to the managing director of HerMoney, Carol Brick.
As the founder of Ireland’s only financial advice firm dedicated to women, Brick often finds herself “highlighting financial gaps when there is a choice taken to stay at home”.
“Give it careful thought,” she advises prospective stay-at-home parents. “Don’t just look at financial planning, look at what you may be missing out on. Some people are just all about the salary but your employer could be paying 10 per cent into your pension so look at all parts of remuneration.
“Giving up money is not the only thing. There could be a company car, income protection, things you might have to reinvest in.”
One of the money “mistakes” Brick sees frequently when advising families with stay-at-home parents is that their contribution can be overlooked when it comes to insurance.
“If a sole earner – ie the husband – comes in, [they are] usually just looking for life cover and income protection for themselves. However, if you are to put a value on the duties of stay-at-home parents in terms of salary, it would come to €53,000 per annum,” she said.
Research carried out by insurers Royal London found people tended to underestimate the value of a stay-at-home parent’s salary to cover their role as full-time nanny, educator, cleaner, etc – pegging it at €28,000. According to Brick, when people find out how much it would cost to employ someone to replace their partner, “they fall out of the chair”.
In addition to making sure a stay-at-home parent has life cover, she also encourages families to consider what would happen if they were to get sick as they won’t be covered by income protection or, potentially, some social welfare payments because of a lack of PRSI contributions.
ActionAid Ireland tracks the cost of unpaid care performed by women and found this isn’t always reflected in government policy.
“Every day, the majority of women spend time – and often very long hours – cooking, cleaning and caring for children, the ill and the elderly. Yet this work is not captured in data, is not discussed in national debates and so, as a result, is not usually considered when designing and implementing economic and social policies,” said chief executive Karol Balfe.
When it comes to pensions, women are already at a disadvantage even if they don’t take a career break, with the gender pay gap making it hard for women to equalise retirement savings from the get go. In retirement, women have 35 per cent less to live off than men in Ireland, according to 2019 ESRI research.
“A pension fund can be the second-largest financial asset after the family home and can be crucial in mitigating poverty in retirement where a woman agreed to take time out for child-rearing obligations while her partner continued to work full-time, accumulating pension contributions. There is not enough awareness in Ireland of these orders or the impact of divorce on pension savings,” said the authors of an Insurance Ireland report on mitigating the pensions gap.
“One area we really concentrate on in financial planning is making up for a loss in pensions,” Brick says. This can be done by maxing out allowable contributions subject to tax relief when a woman returns to work depending on the available scheme.
When it comes to State pension eligibility, home makers can get credit for up to 20 years out of the workforce to care for children or other dependents.
Coming from a rural background, Brick is particularly passionate about educating women from farming backgrounds on protecting their financial interests while working hard for their families.
“Homemakers do such an incredible job and it is a bee in my bonnet that some of them don’t realise how open they are in terms of financial planning until something changes like, God forbid, their husbands stop working, get sick or a divorce happens,” Brick said.
She advises women to enter into paid partnerships in family farming businesses or be paid a salary with PRSI contributions so that they aren’t worse off when it comes to retirement and aren’t left dependent on their partners after all their years of hard work. “Assisting spouses” of farmers can now qualify as self-employed workers to make PRSI payments.
Stay-at-home partners also need to realise that their ability to apply for credit cards or things like car loans in their own right may go out the window when their income stops. Every application will need to be a joint one, which can take away their financial freedom especially if the worst was to happen.
Brick says that in her experience, a joint bank account coupled with transparency “works well” in helping stay-at-home parents to feel in control of their money. But she still advises partners to keep a little separate cash, controlled just by them, for “the famous runaway fund”.
Because you never know what might happen in life and staying home to care for children shouldn’t leave you unprepared to face it.
