Aug 18, 2017

Calculating the real cost of child care

First-time mom Janet An is taking a break from her law career to raise 5-month-old Ellie and says the cost of day care or a nanny will be a factor when she returns.

"If the cost of child care is going to eat up my entire salary then it might make more sense for me to just continue to stay home with her," An said.

But economist Michael Madowitz says that's not always the best choice. Faced with the same decision after two kids, Madowitz built a wage calculator to measure the impact of staying home to care for his children. He found the losses add up to more than just salary for moms and dads.

"It actually affects how fast your wages grow over time and has really significant effects on retirement savings," Madowitz said.

The calculator takes factors like age, gender, current salary and how long you take off, and tallies how much you will potentially lose in wage growth, retirement benefits, stock options and salary over your lifetime. For example, a 30-year-old woman who earns $50,000 a year stands to lose more than $730,000 in benefits, raises and wages if she stays home from work for five years.

"If you're really low income it actually makes a big difference in what kind of Social Security benefits you quality for," Madowitz said. "If you're really high income you're going to lose a lot of money because you are going to make a lot of money."

An tried the calculator to see the cost of taking a year off from work.

"It's more than I had anticipated," she said. "Especially the lost wage growth."

And she says seeing the big picture will help her make the right decision for her family.

The calculator was designed as a resource for parents who will make their child care decision based on the financial cost. The calculator can be found at

Click here to watch video of this story on WCAX's website. 

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