There is no getting away from the fact that raising a child costs money and lots of it. In 2007, research from a UK financial services provider found the cost of bringing up a child from birth to their 21st birthday is £186,032, which is equivalent to £8,859 a year, £738 a month or £24.30 a day.
The study found that costs had increased by 33 per cent in five years and, worse still, predicted that by 2012 the cost of raising a child in the UK could reach an incredible £265,577, equivalent to more than £12,500 each year.
With this in mind, it would seem nonsensical for a man to celebrate the happy arrival of a child by quitting his job to become a househusband, thereby slashing the household income. But closer examination suggests that this may be an option worthy of consideration.
Childcare Costs
The biggest single expense facing parents is childcare, which accounts for £50,538 of the total bill. This breaks down into nursery fees of £34,320 from six months to school age, £12,654 for after school clubs and £3,564 for holiday clubs. It is equivalent to £312 every month from six months to age 14 for just one child.
A househusband can dramatically reduce this bill or, in some cases, nullify it altogether. Even if a dad plans to return to work once the child is of school age, by then the bulk of the childcare bill will have been saved.
It is important to remember to take tax implications into account when calculating how much better off the family would be with a working dad. The pre-school nursery care bill may be £8,580 per year, but when income tax and national insurance is taken into account that could wipe £12,435 off dad’s gross annual pay.
Working parents can reduce those costs through government childcare support schemes such as Tax-Free Childcare, but this can affect the family’s entitlement to tax credits.
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Tax Credits and Child Benefit
In any case, families with one working parent are likely to receive more in the way of Child Tax Credit than those with two working parents, as calculations are based on the family’s annual income. By contrast, Child Benefit is a monthly payment that may be reduced or withdrawn for higher earners through the High Income Child Benefit Charge.
Another consideration is the cost of working. A working dad will probably have transport costs to meet and may even need a car of his own to get to and from work. Bills for clothes, dry cleaning and eating out will add up too and only once all these calculations are taken into account can a decision be made on whether or not it is financially worthwhile for a dad to work.
It is worth taking the time to make an exact calculation of how much extra income a dad will bring in to the family budget by working. Once that is done, the real dilemma begins, as parents must decide to either raise the child themselves and make the necessary sacrifices or take the extra income and find a suitable nursery.
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