How Paying for Child Care Could Make You Rich

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Child care in the United States is seriously costing families. For something that’s fundamental to the 90 percent American adults who have or want to have children, child care has all the price tags of a luxury good.

child care
Jeffrey Hamilton/Digital Vision

Consider these staggering numbers: In 31 states (plus D.C.), the average annual cost for an infant in day care was higher than one year’s tuition at a four-year, in-state public college, as of 2011. In 22 states, full-time child care for one infant exceeds annual median rent payments. And if you have, say, an infant and a four-year-old, child care costs exceed annual median rent payments in every state.

It’s no wonder stay-at-home motherhood is on the rise, despite a previous decline. The Pew Research Center found that mothers who do not work outside the home rose to 29 percent in 2012 — up from “a modern-era low” of 23 percent in 1999. For most American women and families, stay-at-home motherhood isn’t a matter of “opting out” — a term that generally applies to more affluent, well-educated women who choose to clean out their desks. In a toss-up between funding a roof for your family and funding child care, there is no choice.

"Women lose a staggering 37 percent of their earning power when they spend three or more years out of the workforce." That’s an enormous loss.

But for those women who are fortunate enough to be able to decide between paying for child care and becoming a stay-at-home mom (about 370,000 married stay-at-home mothers had at least a master’s degree and an annual household income of upwards of $75,000, allowing them to forgo their individual incomes), child care shouldn’t be looked at as an expense. Consider it an investment.

Sure, peeling off about $16,000 a year (the median cost of full-time child care for one infant in Massachusetts) from a pre-tax annual salary of roughly $66,866 is a major dent in your pay. The common refrain of essentially “paying to work” comes to mind, especially if you’re not all that passionate about your career to begin with.

But assuming your child does not have special needs, keep in mind that you’re not looking at a lifetime of full-time child care expenses; you’re looking only at about five years (until your child starts school). If you do stay in your field, continue to rack up promotions, earn those bonuses, ask for raises where they’re due, and climb the ladder, you’re essentially investing $80,000 ($16,000 per year) to earn an average of $1.4 million in your lifetime. Sounds like a wise investment.

Conversely, women who off-ramp — even for short periods — endure financial penalties. It shouldn’t be this way, but it is. (And our devastating lack of paid maternity leave has everything to do with it.)

Harvard Business Review concluded that, on average, women lose 18 percent of their earning power when they take time off for even 2.2 years. For the business sectors — where the average time out is just 1.2 years — the penalty is even more profound: Earning power drops by an average of 28 percent.

On the whole, “the longer you spend out, the more severe the penalty becomes,” the Harvard Business School study notes. “Across sectors, women lose a staggering 37 percent of their earning power when they spend three or more years out of the workforce.” That’s an enormous loss.

Margaret Heffernan, author, CEO of five businesses, and giver of TED Talks, said it best in 2013 when she noted that child care is a professional investment. Given that child care overwhelmingly falls to women, why shouldn’t women invest in their careers like men do?

"I'm struck that men don't seem to think twice about investing in themselves — in classes, qualifications, conferences and clubs. They don't seem to have any qualms about spending time and money on their professional development. I think [women] can learn a lot from this. But I also think that men, as well as women, need to see child care costs as a shared investment in their family's future."

And, as Heffernan states, parents aren’t necessarily “measured” in salary, but rather in what they’re able to do to ensure their family’s future — whatever shape that may take. So even though your take-home salary might be slim for the next few years, take the long view. That’s what investing is all about.

More On Maternity Leave:
10 Countries With Better Maternity Leave Than the U.S. 
Ask a Lawyer: What Are My Rights Under FMLA?
These Fortune 500 Companies Make Billions — But Won’t Pay For Your Maternity Leave