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Stay at home or to work : What is the financial & professional price?

Some of our friends are pregnant or have just had a baby. So the conversation of staying at home or going back to work after maternity leave comes up fairly often. When I expressed my interest to stay at home for a couple of years after we start our own family to one of the soon-to-be moms, she was surprised and said she would never do that because it was too risky to leave her career. What if her husband loses his job or worse what if they get divorced after she stays at home for 10 years and is no longer employable? It got me thinking.

Now staying at home or going back to work after a couple of months with the new born is a battle every parent faces and it doesn’t have a right or wrong answer. I am pretty sure every parent wants to spend as much time as possible with the baby. So this post is not really about whether one choice is better or worse than the other, because ultimately this is a very personal decision.

79% of fathers prefer to work full time whereas 37% of mothers prefer full time work Source : Pew Research Center

But there are long term economics in play here as well. There is no denying the fact that there will be financial/professional/emotional repercussions for each of the choices.  Taking a break will hurt anyone’s career and bottom line.

This post analyses only the financial side and that is on purpose. Most of the time, the financial aspect of the decision is only considered after the fact, after having the baby and parting with the baby on that first day of day care. Most of the stay at home or go back to work posts tackle  budgeting challenges or money saving measures.

This is not a post to convince anyone that they should stay at home or that they should be a working parent. Rather this post is a thinking process on what changes financially/professionally so that we can better prepare for it (as much as possible).

Working mothers different countries compared
% of working mothers by country. Source : Nationmaster

Stay at home or to work : Professional consequences

Employability and Market Value

Women now make up almost half of the U.S. labor force, up from 38% in 1970. Most mothers would want to return to the workforce after the child is of certain age. But after being out of the market for 5 or x yrs, their employability reduces drastically.

Previous work history would make one simultaneously overqualified (for entry level positions) and underqualified (for experienced positions).

93 percent of women who took time off wanted to return to their careers at some point—but, unfortunately, only three-quarters of them were able to do so, and only 40 percent could return to work full time. SourceSylvia Ann Hewlett, Economist

In their famous “Motherhood penalty” research, Professors Correll, S. J., Bernard, S., & Paik, sent out fake resumes for a childless woman and a mom, both equally qualified. They found that the moms were viewed less favorably than the non-moms and were substantially less likely to be hired. The women with no kids received more than twice as many interview requests than moms with equal skills. (Fathers and childless men, meanwhile, received the same number of callbacks.)

So moms either end up taking anything that comes along their way or start from scratch.

Career & salary prospects

The “Motherhood penalty” research also found that with the same qualifications, mothers were offered $11,000 a year less in compensation on average. Even after successfully getting a job, working mothers are viewed as less competent and committed than non-mothers (fathers, on the other hand, rate higher than men without kids). Mothers, on average, earn 4-15% less than non-mothers with comparable jobs and qualifications.

Of 190 heads of state, 9 are women; Of all the parliaments in the world, just 13% of members are women; In top corporate jobs, only 15-16% are held by women; In the non-profit world, about 20% of the top jobs are held by women Source : Sheryl Sandberg, the COO of Facebook


Stay at home or to work : Financial consequences

Years of lost salary : According to the book, “The Price of Motherhood” having a child costs the average college-educated woman more than a million dollars in lifetime income. I don’t know if I will lose a million dollars, but it is easy to calculate the lost salary. It is more difficult to calculate the lower salary after re-entering the workforce and it’s effect on subsequent raises. Suffice it to say that it is quite a bit of money.

Retirement : This is where the real financial toll is. For example, if Sarah earns $100,000, maxes out her 401k and her company matches 100% up to 5% of her salary, every year she misses the opportunity to save $22,000. At the end of 5 years with 5% ROI, her investments would have been at ~$125,000.  This $125, 000 nest egg, in 30 years with 5% ROI will have provided her with $540,242 and if the market is good and she averages 8%, her $125,000 will get her 1,257,832, which is otherwise lost!!

Having a child costs the average college-educated woman more than a million dollars in lifetime income. SourcePrice of motherhood

Social security benefits : I don’t know if social security will still be around in another 30 years, but miraculously if it is still around, lost years in the workforce and reduced salary will translate to less benefits.

Mortgage Qualification : This is not a financial loss per se, but living in a high cost of living state such as CA, I see most of my coworkers need to show both spouse’s wages to qualify for a mortgage in a desirable area. It might be better to get a house that could be paid off with one salary, but sometimes, one salary could mean a house in a poor school district or a not-so-great neighborhood.

A plurality of the general population (41%) says the trend toward more mothers working outside the home is a bad thing for society. 

working mother public opinion

Divorce : Till Death Do Us Part

No one enters a marriage with the thought of divorce (no, I am not considering celebrities here). But we cannot ignore the fact that a LOT of marriages end in divorce. In 2009 in the US, the marriage rate was 6.8 per 1,000 total population and the divorce rate: 3.4 per 1,000 population.

If there is no one to count on to financially support the family, years of lost promotions, atrophied skills and no substantial retirement savings, leaves stay at home mothers in very frighteningly vulnerable positions.

Again, I wanted to stress that this post is not to convince parents on whether or not they should stay home.

How can I prepare to stay at home?

Do I think it is unfair that mothers get penalized? Yes and No. I cannot understand the fact that there is no “fatherhood penalty”, I can’t fathom how having a child makes a woman less qualified whereas that is seen as a desirable factor in a man. But I do understand that childless women have an upper hand in the job market compared to mothers.

Having a child is a choice (yes, I mean it). Staying at home is a choice. If someone makes their career their priority and was childless by choice, I don’t see why a mother, who made a choice to be with their kids should get the same benefits.

With that said, it doesn’t mean we can’t plan or prepare better.

Professionally, I see there are several things we could do. For example,

  • Keep your resume fresh by maintaining a flexible or otherwise part time job in your chosen field
  • Maintain current licenses and certifications
  • Take ongoing education courses to stay updated on issues within your field
  • Continue to network even after leaving the job force
Here is a great TED talk for working women -


  • Start a business and earn at least enough to contribute to retirement savings.
  • Make use of spousal IRA (you can contribute even if you don’t have earned income)

At the end of the day, I will choose to do what works best for my family considering all aspects. I won’t judge others and I won’t let the judgement of others affect me.

I think it is better to weigh all the consequences and options and come to an agreement on how everything will work. With either choice, there will always be a what-if question lingering in our minds. Personally for me, being prepared and knowing all the consequences will help me to be happy with the choice I make.

Stay at home mom intro







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