The Second Income: Is It Worth It?

For Nancy McCardel, the days start early. At 5:30 a.m., she gets up to feed her 3-month-old daughter before showering and dressing in a blouse and suit ($300, plus $12 a week for dry cleaning). She rouses her 8-year-old son, and during the summer, whisks him off to a day-care center ($112 per week). She then drops off her daughter at another center ($210 per week) across town. She drives downtown to her job ($4 roundtrip, plus $22.50 per week for parking) as managing supervisor for a public relations firm in Atlanta and picks up a gourmet cup of coffee ($3 a day). She eats lunch ($4) at her desk. At 4:30 she races from the office to get the kids. After a quick dinner, she bathes the children, reads to them, tucks them into their freshly made beds ($70 for bimonthly housecleaning), and does chores. By 10:30, she tumbles into bed. At week's end, this 35-year-old wife and mother wonders: Is it worth it?

Financially, the answer isn't clear. Although more than half of all women with preschool children hold paid jobs, many of them soon discover that much of their earnings are eaten up by the costs of child care, a professional wardrobe, and other work-related expenses. Ultimately, some women (and many men) argue it doesn't pay for women to work when the kids are small.

The numbers certainly seem to support that assumption. For example, a hypothetical suburban couple working in New York City and whose combined income is $150,000 saves more than $15,000 in federal taxes, $5,070 in FICA taxes, and $5,184 in state and local taxes when they live on a single income of $80,000. The couple will save an additional $32,634 when they lop off the mother's costs of working: child care, commuting, and such. Instead of losing $70,000 in income, the actual loss is only $4,544 (table).

Each family's spending habits vary so widely, of course, that it's almost impossible to generalize about how lucrative a second income actually is. And having the option to choose between working or staying at home with your child is a luxury that millions of single mothers and less-affluent families don't have. Still, on paper, it often seems that a second salary for a higher-income family doesn't mean much improvement in their standard of living--especially in the child's early years.

That determination is shocking, but also somewhat misleading. While a good chunk of a working mother's salary does foot those work-related expenses, it's questionable how much would be saved if the woman stayed at home. Whether you work in an office or stay at home, you still have to eat, says Jane Bermont, a consultant with Boston-based WFD, a leading provider of corporate work/life programs.

Grabbing a tuna on rye from the fridge isn't as pricey as the lunch special downtown, but you may wind up eating out lunch frequently with other stay-at-home moms and their tots. Even a quick chat over a cup of coffee and danish will set you back three bucks. What's more, you may find yourself doing more shopping now that you have the time. That's not altogether a bad thing, if you shop the sales. Your babysitter costs won't be eliminated entirely. You'll still need to get away from the kids--to run errands or enjoy time by yourself.

The real problem in this tally, however, is its short-term view. Even if your take-home pay covers little more than your expenses, argues Cindy Hounsell, executive director of the Women's Institute for a Secure Retirement in Washington, from a financial standpoint, it would still pay to work. "By remaining in the workforce, you're making a long-term investment in your career and future earnings," says Hounsell.

Child-care costs, the heftiest expense by far for most working mothers, don't last forever. Eventually, Junior will grow up and go to school. And by that time, most working moms will have gotten a raise, maybe even a promotion, and regularly siphoned some cash into a 401(k) or similar retirement fund. Our New York professional would stockpile $186,386 in her retirement plan over 10 years--if she keeps working.

Building up a 401(k) nest egg--if that's an option for you at your job--may be a hidden benefit of remaining in the workforce, both in the short and long term. The 401(k) contributions give you an immediate tax break by reducing your current adjusted gross income. "Every dollar that you put in will save you about 35 cents in federal taxes today," says Douglas Mollin, a certified financial planner with ProPlan in Elmhurst, N.Y. Over the long haul, the money you sock away into a 401(k) grows tax-deferred. Obviously, the more you put in over the years--and the earlier in your life that you do so--the larger your holdings will be upon retirement. And, if your employer matches all or part of your contribution, you're getting free money. "Think of it as an annual, tax-deferred bonus," says Mollin, "that you'd be forfeiting if you quit." Using that logic, our New York professional earns not $70,000 but $73,500 annually.

Meanwhile, women who step out of the paid workforce for an extended period may find that they're earning power has diminished. "It's especially troublesome for women reentering who are over age 40," says Bermont. Unless they update their skills, returnees may earn less now than they did 5, 10, even 15 years ago when they stopped working to raise their kids.

FINANCIAL JEOPARDY. Stay-at-home moms may even be putting themselves in financial jeopardy. It's risky to depend on a single wage-earner, given the constant threat of layoffs. And divorce and widowhood--two real possibilities--often put nonworking wives in a precarious position, says Hounsell, if they forgo all responsibility for their financial future.

The bottom line doesn't tell the whole story, of course. "For many women, the decision to work, or not, involves more than money," says Norman M. Berk, managing partner of Berk Patterson, a financial planning firm in Birmingham, Ala. Some parents don't believe in day care. "Do I really want someone else raising my child?" asks Denise Larkin. For this 33-year-old former international portfolio trader, the answer was no. Larkin quit shortly after the birth of her first child last year.

Other mothers feel they must take a more active parenting role--at some point in their child's life. Ellen Bartel, 42, recently quit her job as vice-president for institutional advancement at Alverno College in Milwaukee. While she has worked full-time since her children were born, Bartel feels that her two boys, aged 8 and 9, need her full-time now. "They're asking more complicated questions," she says. "And you only have a small window of opportunity when you can be influential in their lives."

Women who are committed to a career, on the other hand, often see their job--as many men do--as an integral part of their identity. And they may not be willing to give that up. Playing peek-a-boo and singing Twinkle, Twinkle, Little Star all day long can be tedious--even for the most nurturing of parents.

The spouses of working mothers are apparently happier, too. In She Works/He Works: How Two-Income Families are Happier, Healthier, and Better Off ($24; Harper San Francisco), clinical psychologist Rosalind Barnett explains the findings of her three-year study, funded by the National Institute of Mental Health, of 300 families in the Boston area. "When the husband and wife both work, it puts less stress on the marriage," says Barnett. "They have more security, and more flexibility."

If only real life were so simple. But add a sick child or a trusted nanny who has just quit, and even the best-laid plans go awry. "I have to go out of town next week," says McCardel. "That'll really upset everyone's schedule." But she wouldn't think of giving up her job. "My work is challenging, and I need that," she says. Besides, that second income is keeping the family on track financially. The McCardels recently bought a new car and are trying to beef up their savings for the kids' college educations.

"We couldn't do that if I didn't work," says McCardel. "Two incomes give us more choices.

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