This post also appears on The Huffington Post
If you could invest $20,000 per year for 5 years and this investment returns 100% in the first 5 years, 200% in years 5-10, 300% in years 10-15 and 400% in years 15-20, all in after-tax dollars, would you be interested? This is where you nod in excited agreement!
I oversimplified the situation above, and you can easily tell that the investment at $20,000 after tax per year for 5 years is the childcare costs for your child for years 1-5, while you are out there being a fabulous working mom. I am assuming that after year 5, your child will attend a public school, dramatically lowering your childcare costs. The returns are your work earnings, growing over time due to raises, promotions, bonuses and your general awesomeness. To be added to the above returns are the medical and dental benefits, savings plan, retirement plan and a variety of other fringe benefits that may be available to you.
There are many reasons why women do not return to work after becoming mothers and I respect the choices a mother makes. I often hear, however, that mothers do not return to work because it does not make financial sense. I hear that their after-tax salaries barely cover the cost of childcare, so why bother going to work to just turn around and write a check to a daycare center or pay cash to a nanny? What is missing from these statements is the word TODAY. You may be right, TODAY. The cost of childcare may be a large percentage of your salary now, but your salary today is a fraction of what it can be in the FUTURE if you stay in the workforce, and nurture your career, along with your children.
If your dream is to have a career and raise children, these are the things I wish I would have known before I became a working mom, as they would have saved me some worrying:
- Childcare costs will generally decrease dramatically after your child is 5 years old
- Your salary will generally increase with annual raises, promotions and job changes.
- Your bonus may grow as your career grows
- Your other sources of compensation (stock options, restricted stock, etc.) may also grow as your career grows
- Therefore, the percentage of your total earnings spent on childcare costs decrease dramatically after year 5 and continuously until college.
Of course, I am assuming that you are hard working, talented, a little lucky, and don’t stink at your job.
If your dream is to have a career and children, don’t leave your career before you even got it started! Stay in your career, knowing that the first few years are the lean years of investment for the next few years, which can bring tremendous financial, personal and professional growth.
P.S. Since I am an Excel geek, I put together a Net Present Value (NPV) of Your Career Calculator, which enables you to compare the investment in childcare costs versus your current and expected earnings. Enter your numbers and see the truth! Download the Calculator here: http://cl.ly/SrYw