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Can't really afford to quit work to look after your child? ...think again

The average cost of raising a child up to the age of 18 has been estimated to be in and around €200,000. So faced with the prospect of giving up work after having a baby, you may find yourself thinking 'not in a month of Sundays'. Yet how much does it cost to have a child and give up paid work to look after it – compared to the cost of keeping your job and paying someone else to look after baby?

If you've been earning an average salary of €40,000 and reckon you're just about getting by, you're in for a shock once baby arrives. In fact, your income would need to increase to €60,000 just to pay for childcare.

That's the stark reality of the cost of pre-school care in Ireland today. It's the reason mums are caught in a dilemma about whether to return to work at all – or miss out on those vital years on the career ladder by minding baby at home.

groceries

Whatever family budgeting took place up to now probably revolved around how much disposable income you had for meals out and weekends away. Now, it revolves around disposable nappies and the cost of child-minders.

There are costs whether you continue working, or decide to stay at home.

We asked chartered accountant Tommy McGibney, of McGibney & Co in Virginia, Co Cavan, what a person earning €40,000 pa can expect to take home every month.

He says it's about €2,505 – enough to cover basic household expenses such as mortgage, utilities and groceries.

When an infant enters the picture, you can expect to pay creche or child-minder fees of around €800 per month, and would have to earn at least €60,000 if your pre-baby income is to stay the same, he says.

Even if you're lucky enough to get a cheaper alternative, like an au pair, you will still need a salary increase of €8,750 just to pay her board and lodgings (see table, below).

Returning to work carries other costs such as transport, lunches, after-school care for school-going kids and work attire. In fact, it can be up to €1,700 a month just for the privilege of being able to work (see table, below).

More than one child, and that's the time many women, and it is overwhelmingly women, decide it's simply not worth going out to work, economically. There is no tax relief on child-minding fees. According to the National Women's Council of Ireland, public spending on childcare and early education as a percentage of GDP is among the lowest in the Organisation for Economic Co-operation and Development (OECD). "The average is 0.7pc with some countries, such as Iceland, Denmark and Sweden, as high as 1.4pc. In Ireland, we spend approximately 0.4pc. Consequently, childcare costs are among the most expensive anywhere," it said in a recent budget submission.

The OECD estimates the childcare cost in Ireland is 29pc of family net income, more than double the average of 13pc.

Director of the National Women's Council of Ireland (NWCI) Orla O'Connor says it's not just about the cost of childcare. "There's also the opportunity cost to a mother staying at home. If she goes on a career break she can expect to go back to work at a lower level, especially if the break has been elongated by more than one child. Her salary will be less on her return, which affects pension entitlements and very often it will be to part-time work as she needs the flexibility."

A 2011 study by the Equality Authority found that 62pc of women had modified their working hours on becoming a parent.

Of these, 90pc had decreased their working time. It added that women on lower incomes were far less likely to return to work after having a baby.

Those lower earners are often lone parents, who face particular stresses. Stuart Duffin is policy director with One Family and says that there's a fine line between a single mother supporting herself and her baby or ending up on State benefits.

"Single parents find it much harder to deal with the 'what if' scenarios at work, 'what if baby is sick, what if I'm asked to do overtime', because they don't have anyone to juggle it with."

choices

Employers' attitudes to flexibility can be constricted and you become a cost to them – they won't admit that of course, but lone parents often end up with poor choices as a result. It's one thing getting a few hours' work in a cafe or shop, but it's not going to get them off benefits or on a career ladder.

"It's not so much about the childcare," he adds. "It's the type of care. Lone parents are often left in the poorly funded community creche market and, even if they are working, peripheral costs like transport or providing afterschool care eat into earnings."

Senator Ivana Bacik has been vocal on family equality issues for years. "Initiatives like the provision of the second free pre-school year would be a great starting point for women or men returning to work after taking a break to raise children," she says. "However, ideally we'd have paid paternity leave, paid childcare and greater supports for families making those choices.

"The cost of the gap can be enormous and it's not just an economic one, of course – parents have to decide if they want to stay at home, or if they want to return to paid work. We should try and build a system where there's recognition that time out is not time lost, but suspended.

"There is strong legislation in place to protect workers' rights, but we need to explore that there is no disadvantage in taking time out to look after children because women often leave during critical career years."

Ms Bacik admits it is much easier in the public sector to avail of career breaks without the same losses which apply in the private sector or to the self-employed.

One of those big losses is the hit to pensions. A five-year career break can cost up to one third of a woman's pension, or €200,000 in pension funds, according to Samantha McConnell of IFG Corporate Pensions.

RETIReMENT

"Many women in the Irish workforce are simply not aware of the long-term financial impact of having a family on the retirement provision for the stay-at-home spouse, which is usually the woman."

IFG ran a study looking at the effect a career break to mind children can have on future pensions. "A mother who decides to stay at home for five years from 35 to 40 would end up with a pension fund worth €194,316 less than if she had uninterrupted service to retirement at 68.

"This is an almost one-third reduction in their pension fund, which seems a lot considering that the worker was only away from the workplace for a relatively short percentage of her overall working life."

However, the period out of the workforce can be up to 15 years, which will have a huge effect on the amount that they and their employer contribute to their pension.

It's interesting to note that 45pc of all Irish women aged 15 to 64 are currently not officially in the workforce and, therefore, have no official earnings.

"And the crux of the matter is that women actually need more money than their male partners at retirement, as longevity statistics show that women who reach retirement age can now expect to live until 88, compared to men's life-expectancy of 85," adds McConnell.

Of course, it's not all about money. Psychologist Maeve Halpin, of Appletree Health & Wellness in Ranelagh, says: "Leaving baby can generate a plethora of conflicting emotions.

"While the child's separation anxiety is expected, the mother's may come as a surprise.

"She can feel sad and resentful about missing out on her child's first word or steps.

"The second emotion is, of course, guilt. Many women of our generation will be daughters of stay-at-home mothers and will be acutely aware they are not available to their children.

"Mothers at work can feel guilty that they are enjoying work life; at home they can feel guilty they are not staying late in the office like their colleagues. It can absolutely feel like a no-win situation."

Add tiredness and stress factors due to lack of sleep and it can be an incredibly difficult time. The added financial worries don't help while families struggle to pay for the costs involved – whether mum goes back to work or not.

All tables courtesy of chartered accountant Tommy McGibney, of McGibney & Co in Virginia, Co Cavan


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