Financial Learning Center
- Rethinking Your Benefit Elections
- Disability and Life Insurance
- To Work or Not to Work
- Looking At Day Care
- Employing a Nanny
- Tax Advantages Associated with Children and Families
- Children's Taxes, Tax Returns, and the Kiddie Tax
- College Funding–There's No Time Like the Present
- Estate Planning and Children
- Other Tax Credits
Whether or not to go back to work after the birth of a new baby is a decision affected by many different factors: commitment to one's job or career, views on parenthood, marriage attitudes, and finances. We'll concentrate on the financial aspects of your decision. This, of course, doesn't diminish the importance of the other factors. The added expense of your new child is considerable. The idea of extra income to help pay for the new arrival may seem appealing, but along with the added income comes added expenses. Added income means added taxes. Thanks to withholding laws, your take-home pay is considerably less than your gross earnings, as much as 35 to almost 50% less!
The next largest expense will probably be day care expenses. Day care costs are often underestimated in calculating the true cost of becoming a working parent. Specific costs vary depending on the part of the country you live in and whether you live in an urban or suburban setting.
Other issues you need to consider include everyday overlooked but substantial expenses such as commuting, food, clothing and personal items.
The reality of the situation is that even after deducting all of the associated costs of producing your added income, you may need to work to get that extra money. A balance between money needs and parental needs may lead you to some creative alternatives to a full-time job.
For many, a part-time job is a good solution. It can give the caregiving parent a life outside the house and some needed income, and still leave time to handle the duties around the house. The money produced by this alternative will obviously be less, but you may still want to work because you need a break, or to keep your career on track. You should think over how the pros and cons affect your personal situation before you decide to accept part-time employment.
If your main concern in seeking employment is for health care coverage, be aware that employers are less likely to offer plans to part time workers.
Work At Home
Another alternative to the traditional job is working at home. This will give you more flexibility in allotting your time. You also won't be spending time and the expenses of commuting, which would be "lost time" otherwise. Eliminating commuting, day care, and some of the other added expenses associated with working at a job site means more money for you.
However, working at home presents its own challenges. You need discipline to sit down and get the work done. You need organization skills to balance your work with housework and taking care of the baby. You may miss the socialization and office life. You may consider flextime, if your employer makes it available. This arrangement allows you to work hours other than the traditional shift. Perhaps you would choose longer days Monday to Thursday, then take Friday off. Or try working regular hours Monday to Thursday, take Friday off and work Saturday when your spouse is available to care for your child. The important thing to remember is that you are shifting hours and schedule, not removing hours (and pay) from your schedule. Your child care costs may be reduced with this type of arrangement.
Is Health Care Coverage a Factor?
Having to purchase an individual health insurance policy to cover your family is a very expensive proposition. Many people work primarily to get the benefits of group health care coverage. However, the cost of health coverage is also a big concern with your employer. Studies show that on average health, retirement, and other employee welfare benefits can cost an employer up to 40% of an individual's salary. If you're considering part-time work, keep in mind that benefit costs will stay the same, so that the cost of your benefits relative to your work hours will become very high. Many employers discontinue health care coverage and other benefits for non–full-time employees. If you need the benefits, you may have to work full-time to get them.
If part-time work means you'll have to give up benefits, consider offering to pay some of the costs of the benefits yourself. Some employers will agree to this arrangement.
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