← CommunityLend: People-to-People Lending This and That: Blog Edition →

Stay at Home with the Kids or Work?

June 27th, 2007 ·

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.

Bookmark:   del.icio.us Digg StumbleUpon

Related Posts:

Tags: Miscellaneous

14 responses so far ↓

  • 1 MillionDollarJourney.com // Jun 27, 2007 at 8:24 pm

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

  • 2 Canadian Capitalist // Jun 27, 2007 at 8:29 pm

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

  • 3 FourPillars // Jun 27, 2007 at 10:06 pm

    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 MillionDollarJourney.com // Jun 28, 2007 at 7:37 am

    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 Big Cajun Man // Jun 28, 2007 at 8:31 am

    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 MillionDollarJourney.com // Jun 28, 2007 at 8:38 am

    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 Anjo // Jun 28, 2007 at 12:00 pm

    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 Phil S // Jun 28, 2007 at 12:24 pm

    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 FourPillars // Jun 28, 2007 at 12:28 pm

    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 // Jun 28, 2007 at 1:08 pm

    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 Phil S // Jun 28, 2007 at 1:25 pm

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

  • 12 FourPillars // Jun 28, 2007 at 2:34 pm

    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 MillionDollarJourney.com // Jun 28, 2007 at 5:53 pm

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

  • 14 Financial Jungle - » Jungle Bulletin: US Dollars, Diverse Market, Child Benefits and Universal Life // Jul 9, 2007 at 1:12 pm

    [...] Universal Child Care benefit, and Canada Child Tax benefit. Reference MillionDollarJourney and Canadian Capitalist for more juicy [...]

Leave a Comment