[Editor's Note: Lots of posts on kids this week, so apologies in advance to the childless. The following guest post was submitted by regular WCI reader and surgeon, Dr. Astrid Moise. Dr. Moise and her surgeon husband live in the Midwest with their three boys ages 10, 8 and 5. We have no financial relationship.]
Childcare Needs of a Dual Physician Couple
Lifestyle considerations play a huge part in determining whether or not you will be a wealthy physician achieving financial independence in your forties versus a poor physician working until you drop dead. No doubt raising children ranks right up there among lifestyle choices that can have a major impact on the bottom line. One major decision that needs to be made upon learning that you are expecting is childcare. Like many of you, I am one half of a dual physician household. Not only are we dual physicians, we are surgeons. That means running into the hospital in the middle of the night for emergency surgeries and/or consults, 7:30 OR start times, and unexpected take-backs for bleeding. When we found out we were pregnant I was a fellow. For a number of reasons, not a single one financial, we opted for a nanny. My son had a traumatic delivery and I essentially spent almost the entirety of my maternity leave with him in my arms or in a baby carrier. I wanted to maintain that one on one relationship for at least the first year of his life. My husband and I also had ridiculously unpredictable schedules (did I mention I was in my fellowship) and I didn’t want to be in the operating room hoping that I or my husband would be out in time to pick up our son.
Costs of Childcare for Doctors to Consider
But since this is a personal finance blog, we will focus on the finances. I live in an affluent suburb (median household income of $95,000) of a medium-sized city in the midwest so the prices reflect that. First, with regard to daycare, costs are tiered. The highest cost is during the infant years when the ratio of provider to child is highest. The costs come down generally during the toddler years and then come down again for the preschool years. My youngest is now four so it has been a few years but I did canvas five center-based child care locations in my area and these are the numbers I came up with. Interestingly, if you look at a daycare website, they almost never post their tuition online. Very irritating. Two daycare centers would not share tuition information unless I came in for a tour. I skipped those two. Daycare costs at three different centers – both local franchises – for an infant full-time was $230-280/week yielding a rough estimate of $996-1,213/month. That puts us at an annual cost of $11,960-14,560.
Interestingly enough, I took a look at care.com and they quote the average cost of center-based daycare in the United States as $11,666 per year ($972/month) with annual prices ranging from $3,582 to $18,773. They reference the National Association of Child Care Resource and Referral Agencies when quoting these numbers. As a point of reference, my brother and sister-in-law live in the high cost of living Washington D.C. area. They were recently quoted a low of $1,600/month to a high of $2,200/month.
In-home childcare versus center-based child care will often be cheaper. I did not investigate any of those in preparation for this post. I could not find anyone who used an in-home daycare and they generally advertise by word-of-mouth when a child outgrows their care.
Costs and Implications of Hiring a Household Employee
In my area, nannies are generally paid an average of $16/hour. Care.com also quotes $16 as the average cost per nanny with a range of $12 to $18. Keep in mind that the numbers can change based on how many children are under the nanny’s care. If you opt to pay the nanny the average pay per hour, expect to shell out $33,280 in salary alone. It does not end there. As a household employee, you are responsible for paying the employer portion of FICA which amounts to 7.65% of the employee's wages, or $2,545.92 in this case. Some cities will require you to pay unemployment compensation if you pay anyone wages of >$1000 per quarter up to a certain wage. We had to pay 2.7% of her salary up to $9,500, which amounts to $237.50. As a household employer, you are also required to withhold federal and state income tax on your employee’s wages which you can hand over to the IRS quarterly or with your tax return April 15. These quarterly withholdings are not an additional expense, just another item on your to-do list. So that salary of $16/hour actually costs you, the employer, a total of $36,064. Some people outsource the withholding to another party. I opted to do it myself. Nannychex, care.com, and others offer this service. For roughly $30/month they will send the nanny a weekly check. For $75-100 they will file your quarterly forms. For a few hundred, they will prepare the W2 for you to provide to your nanny.
Other things to consider is transportation. As the child gets older, you may ask the nanny to take the child to playdates, the library, or swimming lessons. You could opt to provide the nanny with a car with the concomitant cost of increased car insurance and maintenance costs. Or you could reimburse the nanny at the 2018 IRS mileage rate of 54.5 cents per mile for use of their own private vehicle. We had a minivan that we purchased new with the second child that we allowed the nanny to use.
Does the Cost of a Nanny Decrease With Multiple Children?
In summary, a nanny can cost twice or triple that of daycare. One thing to consider, however, is that in the case of multiple children, the cost of a nanny can more approach the cost of daycare. The nanny may get a bump of an additional $1 to $17/hr for that extra child, resulting in an annual increase (including taxes) of $2,329, a six percent increase. In contrast with daycare, your cost will essentially double. I say essentially because the cost of daycare for a toddler is slightly less than that of an infant. However, I find that many families do not switch to a nanny after multiples. If the older child has already been in a daycare setting and is happy, it is difficult to pull them out to be with a nanny. In addition, at three years old, many of the daycare centers will have an integrated pre-school within them which is generally considered a positive as parents look towards encouraging their children to develop social and pre-academic skills.
What I do find with people that employ nannies versus using a daycare, is that the added cost of a second or third child is minimal. At the same time, daycare cost will get less as children get older so that needs to be weighed in as well. Nanny costs, however, will essentially stay fixed for as long as all the children are not enrolled in school. For example, although my oldest one started kindergarten (essentially graduating from the nanny’s care) when my youngest was still an infant, I was still paying her the normal full-time rate. If my kids were in daycare, I would have noticed a significant reduction in expenses.
A brief word about au pairs although I do not have direct experience with them. One of my neighbors has used au pairs exclusively through cultural care au pair. The program fee can be considerable. Cultural care au pair quotes a processing fee of $8,695 along with a $75 registration fee and $300 program fee with a weekly stipend fee paid to the au pair of $195 weekly. The total annual cost would be $19,210. The hefty processing fee goes to recruitment, background check, obtaining a visa for the applicant, an airplane ticket, and training of the au pair. Aupairs are paid anywhere from $100-$400 per week with a minimum stipend fee of $195 as stated above. A car needs to be provided for the au pair as well as their own accommodations, essentially their own bedroom. Aupairs are also restricted in terms of the numbers of hours they can work, but generally, they can work a max of 10 hours a day and 45 hours during the week. They generally work for one year, although extensions can be made at the request of the employer and au pair for an additional year. When including the car requirement, housing arrangement and feeding the au pair, the cost is more than daycare but possibly less than a nanny.
My issue with an au pair is that you don’t select who you get. They just show up. Having said that, if there is an incompatibility, the agencies make every effort to remove the au pair and replace her with another one. My nanny actually started as an au pair.
Why Did I Choose a Nanny?
So why in the world would I pay more than double the amount for childcare if I didn’t have to? I alluded to a few reasons in the beginning. The unpredictable schedules my husband and I had was tops. But other perks of a nanny are the fact that they will do light housekeeping and laundry for the kiddos. When we went on family vacations, she would pack the kids’ suitcases for me. Sometimes our nanny would prep meals for me. If she was making rice for the kids, she would just make rice for the whole family. In addition, when your child is sick, they can stay with the nanny. If your child is visibly sick, the daycare will force you to keep them home. It was also nice to just leave the kids in their pajamas and in whatever state of “morningness” they were in and have someone else take over. My friends with kids in daycare had to coax sleepy children into clothing, feed them as well as cart around their food for the day every morning. Some daycares have rules like you can only bring in finger food for kids to eat. So that means no applesauce, oatmeal or any other item that requires feeding the children one-on-one.
Cons of a nanny are obviously you have someone in your house all day. Sometimes the nanny might have odd habits that you essentially put up with – like rearranging your kids' closets, leaving every single light on in your home, or going through a roll of paper towels a day. It’s like when you first moved in with your spouse and you discover one by one all their quirks. Even worse, sometimes the nanny gets sick and can’t make it. My nanny was very conscientious but one day she came in looking as close to a cadaver as a healthy person could look and I was forced to cancel my day and send her home. Another time it was a funeral. Lastly, nanny horror stories abound with regard to neglect, physical abuse, and just plain stupidity. We have been fortunate to have worked with some really good people in the past and don’t have many bad stories to share.
In retrospect, I think we made the best decision for our family using a nanny. In fact, I consider it the best life hack we as a dual physician household have done to date.
What do you think? Have you used daycare, a nanny, or an au pair? How much did it cost you? Which childcare option would you recommend it to others? Comment below.