‘A bittersweet pill to swallow’: Young couple earns $186K/year but child care eats up most of the wife’s salary — but here’s why Ramit Sethi says it’s not a given that she should stay home

Difficult decision

Sethi sympathizes with their situation.

“[Child care] is such a difficult topic for parents across America,” Sethi says. And it’s only become more challenging as the price of it has exploded in recent years. The cost of daycare and preschool rose 263% from 1990 to April 2024, according to a report by KPMG. That’s faster than the pace of inflation over the same period.

As of 2024, the average weekly cost of daycare is $321 per child, according to Care.com. Meanwhile, average weekly earnings in the first quarter of 2024 for full-time and salary workers were $1,143, according to the Bureau of Labor Statistics. That means many working parents — especially those with multiple children — may find their child care takes up a significant portion of their paycheck. And the proportion could be much higher if the couple has more than one child or if one partner works part-time or earns less than average.

As a teacher, Amanda earns $4,487 after taxes every month, while the cost of their childrens’ daycare is $1,881. Taking that cost entirely out of her pay would mean 41.9% of her after-tax income goes to child care, which has compelled her to consider giving up her career and staying at home.

However, Sethi believes the decision to drop out of the workforce shouldn’t be taken lightly.

“Child care is one of a handful of times where couples really sit down and look at the numbers, and too often they conclude that financially speaking, one partner would be giving their entire paycheck to daycare,” he says. “So the conclusion is it’s better for that parent to stay home, and in two-parent households that's almost always mom.”

According to a Pew Research Center’s analysis of U.S. Census Bureau data, in 2021, 26% of mothers were stay-at-home parents, compared to only 7% of dads.

However, Sethi says this decision to stay at home is often reflexive and not well-planned. “Parents rarely talk about what this means for her career down the road, or how expenses will be split up or how discretionary expenses should be handled,” he says.

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The cost of staying at home

A study that followed baby boomer women from their 20s to 50s found that women with children were less likely to work, and that working mothers earned lower wages — a “penalty” of 3% to 5% per year — compared to those without children.

However, this gap closed by the time women reached their 40s and 50s, except among mothers with more than three children, who were presumably in the parenting trenches for longer. Other studies have found significant decreases in lifetime earnings for women with children, and the difference is greater the more children there are in the family.

Despite these costs, parents who choose to stay at home to care for children should have a conversation about how household expenses and discretionary spending is split between partners, Sethi says. And it should be a choice they make together rather than the default option.

As for Amanda and Carlos, they’re on the same page about what they want their “rich life” to look like, but they feel they must make sacrifices now — like having Amanda work when they’d both prefer for her to be able to stay home with their kids.

Sethi challenges them to “just play it out” and see what their lives might look like without Amanda’s income. They might have to cut back on some items, like Carlo’s $200 monthly budget for shoes, but even the exercise of talking it through can help get them aligned on their next steps.

Carlos feels strongly the best option for their financial future is for Amanda to keep working, but after seeing how it would actually impact their monthly numbers and how much Amanda wants to be at home, he tells her he’s open to the discussion. These types of talks, Sethi says, are the only way they’re going to achieve their rich life.

“The work versus stay at home decision is much more complex than [just money.] But what’s really important for them is to really ask each other: What do we want for this life? Let’s get honest with each other and look at the numbers too. Can we make it happen in some form?”