Editor’s note…my wife and I dealt with a similar situation to the one Melissa describes below and we ended up becoming a single income family when we realized nearly her entire salary would be going to daycare. I wrote a guest post on Consumerism Commentary where I discussed the issue of whether or not you can afford to stay home with your kids.
Suze Orman hosts the popular Suze Orman Show on CNBC every Saturday night. We don’t get the station at our house thanks to cutting the cable, but when I’m home visiting my mom, I like to watch.
Recently, she had on a man I’ll call Tom who is a math teacher. During the summer, Tom works at a golf course to bring in extra income. He also tutors on the side. His wife stays home with their four children, ages 7, 5, 2.5 and 1 month old. The family is $45,000 in credit card debt, and they spend nearly $300 a month more than Tom earns each month. They have no retirement savings and only a $3,000 emergency fund.
The Good Advice Orman Gave This Family
Orman’s first step was to cut out the fluff, things like the wife’s manicures, meals out, and the children’s swim team lessons, which I agree with. Even though it’s hard to cut out kids’ extracurricular activities, for the short term, that’s what needs to be done.
The Bad Advice Orman Gave This Family
However, Orman’s other big piece of advice was to have the wife get back to work immediately. (She was a teacher before she had kids.)
Suze, that’s not good advice for a mom with 4 kids.
I don’t know what area of the country this family lived in, so I’ll base my argument on where I live, in the suburbs of Chicago.
The median salary in our area for a teacher is $58,000. By the time she deducts taxes, possible health insurance, union fees, and other governmental fees from her check, mom is likely making $46,400 to $43,500 a year, or $3866 to $3,625 a month. On the surface, Orman’s advice seems spot on, but closer inspection reveals a different story.
In our area, quality day care for an infant is $394 a week or $1,576 a month. Toddler daycare is $322, or $1,288. The mother in this case also has two older children. Assuming she can leave work by 4 p.m. every day, she’ll need an hour of after school care for each boy. At my son’s school, this runs $15 an hour per child, so she’s now paying $150 a week for the two older boys, or $600 a month. All told, day care is costing this family $3,464.
We haven’t even included other expenses like the mom’s work clothes, gas to get to and from work, a bump in income tax now that the family is making more money and possible meals out if mom and dad are too tired after a busy day at work. Quite possibly, if this family lived in my neighborhood, mom going back to work could put them further in the hole than they already are.
A Better Alternative
That’s not to say that mom can’t or shouldn’t work, but a full-time job outside the home probably isn’t the answer. Instead, perhaps mom could work as a tutor online when dad is home or when the kids are napping or asleep at night. Without the daycare expenses, she’ll bring in and keep much more money that can help the family get out of debt.
Suze Orman provides good guidance to many people, but in this case, she flat out got it wrong. Having mom go back to work is not the answer, not when there are four kids to consider.