A legal secretary writes:
>I am presently employed as a legal secretary. I work for an outstanding firm....they treat their employees well, but.......I am just so very tired of "being at work" all day long....My point is, I am seriously planning on doing home day care. I actually went through the process of obtaining a daycare license about 6 years ago, but, at that point, I decided to postpone my plan. So here I am again, planning....
I am hoping you can give me a sense of whether or not home daycare could work out for me financially. With overtime I currently net $54,000 a year but, actually, with my commute, I net around $51,000 and am willing to take a pay cut for the trade off of being at home. A few of my particulars: I own my own home, am single, have three grown children, and five grandchildren. I am 61 years old with no health problems....and most importantly, thoroughly enjoy the daily routine of caring for small children. My plan would be to continue on with daycare when I am eligible to receive my full social security at 66.
I wish I could give you a definitive answer regarding how much child care providers earn, but it varies greatly. Many struggle and have quite a low income. Some few I work with make upwards of $100,000 by charging a higher than average tuition and providing an excellent educational component. (Some run a Montessori program, for example.) Most providers I see are "netting" less than $50,000, though many are in that ballpark. However, my definition of "net income" does not take taxes into account.
As a self-employed child care provider, you will be taxed on your net business income, also known as your profit. This means your gross income from parents (and other sources) minus your business expenses and a percentage of your home expenses.
Taxes are high for self-employed persons. In addition to income tax, you pay higher social security and Medicare taxes, because you must pay both the employer and the employee portions. This is called self-employment tax and it comes to about 15% of your net income. Federal and state income taxes will take another chunk. Overall, California child care providers lose somewhere between 25-50% of their profit to taxes. (Which is why it is important to carefully document all expenses which can be used to reduce your profit.) A provider with a profit of $50,000 will probably be left with between $25,000 and $37,500 after taxes.
You will have to determine the minimum income you need. Plus, I would not even attempt to switch to self-employment unless you have some savings to tide you over. It takes time to build enrollment and there are lots of start up costs (licensing, supplies, etc.).
Be sure to assess the economic climate in your area, as well. During previous periods when layoffs were common, enrollment has dropped for many child care providers. In addition, some unemployed parents started day care businesses of their own, creating a situation where demand for care was dropping at the same time that day care options were expanding.
I don't want to dampen your interest in child care, but it is very different from getting a regular paycheck. New businesses take time to get off the ground and up to a decent income. I'm glad that you are willing to work past age 66. That gives you time to make it through your startup phase and build a thriving daycare business.
The good thing about self-employment is that no one can lay you off or force you to retire. As long as you have the energy for child care, it can provide some good income to supplement your social security benefits down the road.
Last updated on 14 June 2014