Does being a stay-at-home parent make financial sense?

It’s the small moments that make me love being a stay-at-home mom. Making a mess baking muffins together, hearing my kids finally pronounce “L” correctly and seeing their pride in making me a pretend coffee.

But now that they’re two and three years old, I can see how they would benefit from more stimulation outside our home, so I’ve decided to enroll them in daycare and ramp up my work as a freelance journalist.

That’s a decision that’s only possible because of the Canada-Wide Early Learning and Child Care (CWELCC) system, which the federal government implemented in 2022 to subsidize daycare with taxpayer funding. The stated goal of the program is $10-a-day daycare, and so far prices have dropped significantly.

In Vaughan, Ont., for example, where I live, daycare for a toddler averaged $1,285 a month before the program, according to the Canadian Centre for Policy Alternatives. Now it’s around $480 – a savings of 62 per cent a month, or more than $9,600 annually.

With two kids in daycare, families can save more than $20,000 a year, depending on the ages of the children, and that’s on top of other government help such as the federal child-care tax credit and the Canada Child Benefit.

Considering how much more affordable daycare is now, can Canadian families still make the case that they are saving money by having a stay-at-home parent?

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Let’s take a family with two young children. The median annual income for a married woman in this kind of family is $54,910, according to Statistics Canada in 2023, the last year for which data is available. Let’s also say they live in Ontario, so the wife is bringing home roughly $41,500 a year, or $3,458 a month.

If this family had two toddlers in daycare before the CWELCC was introduced, they would have paid around $2,570 a month (the cost would be higher if they had an infant in daycare, but subsidized spots for this age group are extremely difficult to find, so let’s assume mom got an 18-month maternity leave and was able to put the child in the toddler class). That leaves the family with just $888 of the mother’s income left – hardly enough for groceries for a family of four.

But if the same family managed to find spots under the CWELCC system, they would only be paying $960 a month, leaving them with almost $2,500 of income left – enough to contribute to groceries, transportation and a mortgage or rent.

So even with a relatively modest income of less than $55,000 it doesn’t pay to drop out of the work force if you can get a subsidized daycare spot.

Of course, people may choose to become a stay-at-home parent or reduce their working hours for other reasons. It’s incredibly difficult to juggle a full-time job and have young children. Plus, it’s rewarding to witness their milestones. But financially, the numbers don’t add up.

The Canada Child Benefit can take a big bite out of child care costs

Also, consider that by staying in the work force, mothers are contributing to the Canada Pension Plan and their workplace pensions, keeping their health benefits and getting pay increases, as well as maintaining their eligibility for the aforementioned child-care tax credit.

One of the explicit goals of the CWELCC system was to incentivize women to remain in the work force. In announcing $10-a-day daycare, former prime minister Justin Trudeau said, “By building an early learning and child care system, we will … increase women’s participation in the work force and drive strong economic growth across the country.”

It seems that goal is being achieved. Labour market participation among working-age mothers with young children reached 79.6 per cent in 2023, an all-time high, from 75.8 per cent in 2019. It’s not clear if this is directly related to the CWELCC system – inflation and the rise of remote work could have also increased the rate – but it likely pushed the needle.

The question now is whether the program can maintain its funding levels. It’s expensive, costing Ottawa more than $30-billion over five years, with tens of billions more from the provinces just to get rolled out. No federal funding is guaranteed past 2026.

And while some of the cost may be recouped through higher workplace participation, it doesn’t come close to paying for itself. Most women with young children still don’t earn much, relative to other groups, and therefore pay lower income taxes.

Low wages for early childhood educators and staff shortages are also issues for the program’s expansion.

But as long as it remains viable, we may see more moms with young children going back to work after their maternity leaves instead of choosing to stay home just because the numbers don’t work in their favour.

Danielle Kubes is a freelance journalist based in Toronto.