Million Dollar Journey posted about the financial angle of one of the parents opting to stay at home with the kids. I only have one minor point to add (Update: MDJ has updated his post to include CCTB benefits) to his analysis: You’ll also have to account for the Canada Child Tax Benefit (CCTB), a tax-free monthly payment made to eligible families with children under 18. The CCTB is based on your family’s net income (line 236 of your tax return), which for most people would be total income less RRSP contributions, child care expenses, loan interest deductions etc.

For the scenarios detailed by Million Dollar Journey in his post, I used the CCTB benefits calculator to estimate the payments for a Quebec family. In Scenario 1 where a spouse stays at home with the child, the family will be eligible for an annual CCTB of $1,800. In Scenario 3, where both spouses work, the family is eligible for a lower CCTB benefit of $310.

We grappled with this issue when our kids were a year old. For many families there is no choice: mom has to return to work to bring in an extra pay check to support the family. We were in a bit more fortunate position that we could afford to have my wife stay at home with the kids despite the obvious hit of giving up one pay check and the opportunity cost of my wife’s growth at her job.

The ideal solution for us would have been having my wife work part-time. It would have enabled her to keep up with the latest in her field and not having to start all over when our kids are about to go to school. Unfortunately, though she tried hard, she was unable to find a suitable part-time position. In the end, we decided that my wife would be going back to work because she would have been miserable giving up the social and professional aspects of her job entirely. The downside to both of us working is that our lives are so hectic that I don’t have the time anymore for activities like photography.

This article has 17 comments

  1. My original post didn’t’ include the CCTB, it now includes it. Thanks CC!

  2. Canadian Capitalist

    FT: I noticed you have updated with the CCTB calculations. I’ve noted that you have made the correction.

  3. Interesting post.

    My wife is going to stay home with our child and although it definitely hurts us financially, it certainly makes life less hectic.

    If we were both working full time then dropping Junior off at daycare, picking him up again, plus doing errands outside of work would make things pretty nutty.

    We also both have time for photography although our son seems to be our only subject.

    Mike

  4. I made a mistake in my CCTB calculations originally, but I have now fixed them. I used “after tax” income as the “net income” in the calculator. Learn something new every day!

    FT

  5. Excellent, now I have figured out what my “Family Allowance” will be this year, thank you for the link!

    My wife is “stay at home” but will work a little part time at the end of the year, mostly for “egg money” and extras.

    –C8j

  6. Big Cajun,

    Note that if you wife makes more than $8200, it will lead to an elimination of the spousal amount transferred to you. In my calcluations, part time work resulted in large “taxation” due to the reduction of the spousal amount.

  7. To follow up on MDJ’s e-mail, not only does part-time work reduce the spousal amount but also could result in a greater clawback of the Child Tax Benefit.

  8. CC. Interesting link to the calculator. I’m a single guy but just for curiosity I punched in my income as if I were married with one kid and an non-working spouse ($0 income). I was rather disappointed to discover that my hypothetical wife would get a whole $2.21 a month. Yay. Basically zilch aka bupkus.

    I am assuming that it’s because I make too much money. So, I checked to see if it made any difference if it were a common-law relationship and it was still the same. I started dropping my income down until I got a number that looked useful (like $100 a month) and had to go all the way down to $40K / yr!

    This is scary stuff, man! So it basically says if I had a kid, then I’m absolutely, completely and totally on my own! What’s up with that? Isn’t the government satisfied with the fact that I get slaughtered on my income taxes year after year? Grrr…

  9. Phil, you are supposed to enter your ‘net’ income which is your income – taxes – rrsp contributions. This should make a difference.

    Personally I think it’s great that a family that makes up to about $100k or so can still get something (however small) for this benefit.

  10. Canadian Capitalist

    Phil: You should enter your net income or gross income less RRSP contributions, child care expenses, interest loan deductions etc. Mike, a small correction. I don’t think you can deduct taxes to calculate the benefit.

    The current government has introduced two benefits for families with children:
    1) An universal credit of $100 per month (beer-and-popcorn money)
    2) A child tax credit worth about $300 (I think) starting in 2007.

    Other than that, yes you are totally on your own.

  11. Someone should start up a service where you can rent dependents just for tax season… =0)

  12. You’re right CC – I didn’t mean to include taxes.

    Phil S – you are welcome to rent my dependent for short periods of time. I’ll show you how to do the diaper thing.

    Mike

  13. I made the same mistake for net income, i deducted taxes from it.

  14. Pingback: Financial Jungle - » Jungle Bulletin: US Dollars, Diverse Market, Child Benefits and Universal Life

  15. I was a stay at home Mom for 11 years until my youngest started grade 2. If I had to
    do it all over again, I wouldn’t change a thing. We had one income ( my husband’s )
    We managed just fine. Sure we had to do without things we wanted but never did
    without what we needed. Our 3 kids have done better by this. Too many people want
    too many material things. Its amazing how you can actually save money on one income.
    You appreciate more in life, when your not given everything you want. You learn the value
    of a dollar at an early age and you work with it. I now work part-time ( 3 days a wk ) Life
    is good. All 3 kids now have degrees. They’ve done well.

  16. Yes, I agree with ksim. I did the math and we figured that if my wife worked part-time during the week (3 days) and put one child in a daycare during those days, then the gain we make from her work could be made instead by me working on one Saturday. That doesn’t even include the fact the massive numbers of wonderful tax breaks we get when she stays home, including me claiming her $10,200 base amount. If we had 2 or 3 kids and they all went in daycare then it would make absolutely no sense at all for her to work. Hmmm… so aside from keeping up credentials in her field, why else would she work? Economically it’s a whole lot of sacrifice our part for hardly any gains. Do we want to have crazy hectic lives so that we can live in some huge house in the suburbs? heck no… for now we stick with our 820 sqft bungalow with a basement suite being rented out, while saving up our money on the side, and once the kids start coming we will have a solid financial base to work from in order to allow my wife to avoid having to go to work. It frees up evenings and weekends, reduces stress, and lastly it even provides a job opening for someone else to take!

    For her to go to work makes NO sense.

  17. I left my employment almost 6 years ago to stay at home with what is now 3 kids. It was a huge decision as i made a very good living. My husband and I do not regret the decision. Although we would have had much more money, perhaps even the house paid off, I would have missed these important early years with my kids. I travelled alot. My husband works long hours. It makes sens for me to stay at home. It gives my husband peace of mind, he is well cared for, the house is in order… most of the time, the errands are taken care of, and most importantly, the kids have a parent around raising them and caring for them. I am a homemaker, I make our home the best place I can, and my husband loves coming home from work. To me that’s worth more than money.