Since becoming a Chartered Financial Analyst (CFA) Charterholder, people ask me all the time to review their investment portfolios and finances.

These reviews have given me unique insights into people's financial lives.

One thing  that has stood out to me from all of my reviews which I don't see enough people thinking critically about is:

Are Two Incomes Better Than One?

Financially speaking, is it always better for both the husband and the wife to be working?

Does it make more sense to have one primary breadwinner while the other spouse takes care of the home and kids?

Preserving The Fitra in our Children

You're probably familiar with the arguments that traditional roles for the man and the woman are better for raising healthy well-adjusted moral children.

After all, if we don't raise our kids ourselves someone else will inevitably raise them for us. 

Either the TV will do it or the neighborhood or the classroom or Tiktok.

It takes a lot of effort, time, and dedication to make sure we are preserving the Fitra (الفِطرة) in our children. That is, preserving the innate sense of right and wrong that Allah (SWT) has instilled in us from birth.

The Prophet Muhammad PBUH said:

Narrated by Abu Huraira (may Allah be pleased with him) : Allah's Messenger (peace and blessings of Allah be upon him) said, “No child is born except on Al-Fitra (Islam) and then his parents make him Jewish, Christian or Magian, as an animal produces a perfect young animal: do you see any part of its body amputated?”

(Bukhari)

Meaning when an animal is born, it is born whole with no defects and so too is the Fitra of the person.

Doing the Math

Raising our children the proper way is a full-time career which I would argue is far more important than any other career.

Many recognize this.

However, what I think is lost on many is that even from a purely financial perspective having two incomes is often less advantageous.

The obvious case when two incomes are less advantageous than one is when the total costs of the services that the couple has to outsource exceed the income of one of the two spouses.

For example, let's say you want to outsource the cost of cooking, child care, and cleaning in the United States.

The Cost of Home-Cooked Meals

The average hourly wage of a private chef in the US is around $25/hour.

Let's say it takes 4 hours per day to prepare and cook 3 meals for the average size family (2 adults & 2 kids).

$25/hour X 4 hours per day = $100/day ($3,000 per month)

You could buy takeout but this has a high cost on health.

Have you seen the oil that restaurants cook with? How much butter do they use? what goes into their food?

So assuming you'd rather spend money on home-cooked meals and not medical bills and obesity treatments, the cost of having home-cooked meals 3 times a day is around $3,000 per month if you want to hire someone.

The Cost of Child Care

In the US childcare costs an average of $10,000 annually ($833 per month).

This is for average child care mind you!

High-quality child care will run you anywhere from $1,500 to $5,000 per month which comes out to $18,000 to $60,000 per year, per child!

Since we're looking at a family with 2 children this number should be doubled.

Assuming average child care the costs for a family are:

$800 per month X 2 kids = $1,600 per month

The Cost of Cleaning

I checked in my area, and starting costs for cleaning once a week, for a standard-sized home with 2 bedrooms and 2 baths are around $150. This means per month, the calculation is:

$150 per week X 4 = $600 per month

Therefore, the calculation for total costs is:

Total Costs: $3,000 (home-cooked meals) + $1,600 (childcare) + $600 (cleaning) = $5,200 per month after tax expense

Assuming a 20% tax rate, before tax you have to be earning around $6,500 per month (If you take 20% of $6,500 for taxes you're left with the $5,200 you need to cover the costs of cooking, child care, and cleaning).

$6,500 per month of pre-tax income is needed

which gives us:

$6,500 monthly X 12 months = $78,000 per year

In other words, if a mother is doing an average job cooking, cleaning, and raising her children (and only these things), a very conservative estimate suggests she is contributing the equivalent of a $78,000 annual income to the household.

I say "conservative estimate" because most mothers don't do average jobs with their own families. They do high-quality work that no one else can quite do even if they tried. So the true figure should be much higher than $78,000.

A common response to this calculation is:

What If a Couple Can Do Both?

What if a couple can maintain two full-time careers, do all the housework, and provide their children with great care?

For argument's sake let's assume this is possible without any loss in quality. There are still some considerations that I think deserve contemplation.

From a societal perspective, the book The Two-Income Trap observes that despite the dramatic rise in total household income as families moved from a single-earner to a dual-earner structure between the 1970s and the 2000s, household discretionary income actually fell.

(Discretionary Income = Total Income - Fixed costs. In other words, Discretionary Income is everything that you have a choice where it goes.)

This was explained by things like:

• Families needed more cars because they had two people that needed to go to work.
• Families getting into bidding wars for limited real estate that is in good school districts so housing prices went up.
• Universities can charge more for students because families could pay more and the spots at universities that families want to send their children to are limited.

So there was general inflation in prices for the things in limited supply that people needed because of the two incomes that families now have.

Additionally, this may be counterintuitive to some, but dual-income families may be more fragile when facing a  sudden loss of one spouse's income.

How so?

Dual-income families tend to have lifestyles that require two incomes. So if one income is lost there is no one in reserve to step in and help 

For example, when a two-income family buys a house with a $2,000 monthly payment, typically both adults need to be working for them to be able to afford this payment.

In the case of a family with a single earner and let's say a $1,000 housing payment if the breadwinner loses their job they may be able to find temporary work that allows them to afford $500 of the $1,000 payment. The other spouse may be able to find temporary work that pays the remaining $500.

So there is a reserve asset with a single-income family, which is the spouse that is staying at home.

To give a sports analogy, in a single-income household there is someone on the bench. With a dual-income family, the entire team is already playing and any injury will leave them shorthanded.

Additionally, earning potential is often non-linear.

That is to say, income doesn't go up in a straight line in relation to the number of hours worked.

Harvard economist Claudia Goldin calls this The Non-Linearity Premium, which means that someone who works half-time is generally going to receive less than half-time pay whereas someone who works double the hours has the potential to earn more than two people working full-time.

For example, if you think about who is going to become the CEO of a company out of 3 employees. Two of them work 40 hours per week and one of them works 80 hours per week. Logically, the person working 80 hours a week has a better chance to become the CEO. CEOs will sometimes earn 10 if not 100 times what the average employee in their company earns.

Finally, households that spend less during their working years may end up better prepared for retirement. Simply because the lower spending levels reduce their retirement saving needs.

Conclusion

Am I advocating for women not to be educated?

Of course not!

If you'll recall one of the benefits of having a stay-at-home wife and mother is that the family has a reserve asset that it can tap into during emergencies for financial support. This requires investing in the human capital of this reserve asset so that it has income-earning potential.

The argument for the financial robustness of single-income households hinges on there being some income-earning potential for the spouse that is staying at home.

Additionally, people who think raising a child the correct way, instilling in them the values that you want, and giving the child the best chance of living a happy and fulfilled life, do not require an extremely high level of intelligence and education probably have never raised a child themselves.

Not to mention that a man who is working full-time and aspiring to reach those higher levels of income will have a better chance of reaching these goals if he has an educated wife to consult with and get advice from.

I'm also not advocating for women not to work.

When kids are at an age where they go to school or are in summer camp, for example, there may be a lot of extra hours in the day which makes sense to fill with things that are mentally stimulating and productive. This is especially true for freelancers who can increase or decrease their hours basically at will.

What I am advocating for in this article is for a proper cost-benefit analysis to be done about the different courses of action families can choose to take and the different relevant considerations that need to be accounted for in their decision.

The bottom line is that in terms of increasing the financial well-being of a family, let alone all of the other very important considerations, sometimes two incomes are not better than one.