2 working parents in the Netherlands vs rest of Europe

[eregal]

My partner and I are both from outside EU, currently living in the Netherlands, both currently have relatively well-paid jobs. Since our baby was born, between the reduced income from (unpaid) parental leave, moving close to our work and daycare, and the high cost of daycare itself, our savings rate hit rock bottom.

The easy way of fixing this would be to move to another city and one of us quitting its job to take care of the baby. However, it can become very expensive in the long term given our careers, as we're still far from our ERE goal. I'm wondering if relocating to a nearby country could make a difference.

Do other countries inside the EU have better conditions for families with 2 working parents, or is everywhere more or less the same?

As far as cost of life, according to Numbeo any German city is cheaper than Amsterdam. However I'm concerned about these in particular:
- childcare cost: 9EUR/hour in a daycare
- taxation of savings/investments, not based on actual returns, but a percentage fixed by the government. For example https://www.orangetax.com/2016/09/box-3 ... 17-no-1-2/, having 125.000EUR in assets, means you pay 3.351EUR that year, no matter how it's invested.
- income tax up to 52% in the highest tax bracket

Am I missing something?

[DutchGirl]

With 125k euros of assets you do not pay 3351 euros of taxes! First of all, you didn't read that the 3351 was the assumed profit, not the tax ... the tax is 30% of the assumed profit. Second, somehow the blogpage made an error in their calculation as well. In 2017, assuming you have 125k as a couple and that you file taxes as a couple, your actual tax would have been 644 euros.

For 2018, it's as follows:

Assuming that there's two of you and that you file your Dutch income taxes together, and that you had 125k euros of assets together on January 1st, 2018. Then the first 60k of euros of assets are not taxed. The remaining 65k euros is taxed. In 2018 that would mean that you'd pay 392 euros of asset tax. Check it yourself over at https://www.berekenhet.nl/sparen-en-bel ... kenen.html . And please note: your house equity does not count.

I don't know a lot about childcare because I don't have kids, but I know that people often get an allowance from the Dutch government to pay for the childcare. Did you know that, and did you apply for this? This is called kinderopvangtoeslag; more info here: https://www.belastingdienst.nl/wps/wcm/ ... ngtoeslag/

And yes, it's true that in the highest bracket you pay 51.95% of tax. But like in the US, it's a progressive tax system. So it is worthwhile to try to get deductions, like the deduction for paying interest on your mortgage, and the deduction for qualifying gifts to charities, and the deduction for money that you put away for retirement (note: you have to calculate how much you can put away by calculating your jaarruimte).

[rube]

What DG said.
Perhaps other EU countries have other advantages, but kids will cost money anywhere. IMO (parent of 2) it is relatively well in the Netherlands.

If you want to spend less money: move out of Amsterdam? Assuming your rent or mortgage is huge...

[prognastat]

Another possibility is also are there any grandparents in the picture that live nearby, have the time and may want to take care of the baby for 1 day of the week. This gives your kids some quality time with the grandparents and also saves some on childcare.

[Bankai]

You made me check tax rates in the Netherlands and the UK looks like a tax heaven in comparison.

On income of E68.5k (£61k) you'd pay E27k tax on this income in the Netherlands while in the UK this would be £19.7k. And the difference only goes up from there (40% tax in the UK vs. 52% in the Netherlands).

You have access to ridiculous* tax-advantaged savings & investment account (stock & shares ISA) where you can pay in £20k per year and any capital gains and dividends inside are interest-free.

* there are multiple ISA millionaires by now. Some of these people make six figures in capital gains each year and never pay any taxes.

If you want to invest more than £20k per year, you can open an ordinary brokerage account & still enjoy £11,7k 'allowance' per year on capital gains. I.e. if you make a £50k profit on your shares inside ISA & another £15k in an ordinary investment account, you'd only pay tax (18% or 28% depending on your income) on £3300 profit in the ordinary account, c. £925 max. And capital gains tax is only due on 'realised' gains, and you can offset losses against gains.

You can also invest in a self-managed pension account where you can contribute from your gross pay. You'd pay income tax once you start withdrawing, but only above personal tax-free allowance (£12.5k per year from next April).

Did I mention primary residence is exempt from capital gains tax?

Add 'free'* healthcare and you have one of the best countries in Europe** to live while accumulating.

* there's National Insurance payable along with income tax, this goes towards healthcare, state pension & benefits

** enjoy while it lasts

[phil]

It is certainly possible for a couple with well paid jobs and one child to have a high savings % in The Netherlands. To get better and more specific advice, it would be helpful if you laid out your income and expenses so we see what goes where and what you might be missing.

In addition to what others have said, you might be eligible for the so-called 30% ruling. Did you investigate that?

[eregal]

With 125k euros of assets you do not pay 3351 euros of taxes! First of all, you didn't read that the 3351 was the assumed profit, not the tax ... the tax is 30% of the assumed profit. Second, somehow the blogpage made an error in their calculation as well. In 2017, assuming you have 125k as a couple and that you file taxes as a couple, your actual tax would have been 644 euros.

For 2018, it's as follows:

Assuming that there's two of you and that you file your Dutch income taxes together, and that you had 125k euros of assets together on January 1st, 2018. Then the first 60k of euros of assets are not taxed. The remaining 65k euros is taxed. In 2018 that would mean that you'd pay 392 euros of asset tax. Check it yourself over at https://www.berekenhet.nl/sparen-en-bel ... kenen.html . And please note: your house equity does not count.

Thanks for the clarification! I need to check those numbers closely. However, I’m concerned about what would be the amount of savings needed to get a certain income if ERE.

For example. Let’s say my goal would be an income of 1000EUR/month, we’d need 300.000 + 15% cash, but we’d actually need more because of these taxes (150k per person). What scares me a bit, is that the taxes are based of expected return and not real return. That’s awesome if the market behaves better than expected, but I’d be losing a lot of money on a bear market. How do you plan to deal with that?

[eregal]

What DG said.
Perhaps other EU countries have other advantages, but kids will cost money anywhere. IMO (parent of 2) it is relatively well in the Netherlands.

If you want to spend less money: move out of Amsterdam? Assuming your rent or mortgage is huge...

I agree. The *big* expense here is the rent in Amsterdam: 1600EUR for a 2-bedroom apt. If we moved outside Amsterdam and we keep renting, I'm not sure if you can rent around amsterdam in the free sector below 1200-1300EUR, and for commuting with a baby in another it doesn't look practical.

I've been thinking about buying for a pretty long time, but haven't come to a decision I'm happy with, which is, no matter how the real estate market behaves in the future. I'll post my thoughts about housing in another thread...

[eregal]

In addition to what others have said, you might be eligible for the so-called 30% ruling. Did you investigate that?

I currently have 30% ruling, but it's for a limited number of years and it's coming to an end very soon.

It is certainly possible for a couple with well paid jobs and one child to have a high savings % in The Netherlands. To get better and more specific advice, it would be helpful if you laid out your income and expenses so we see what goes where and what you might be missing.

Note, this is not our budget yet (we're spending more than this), but this is what I'm aiming for 2019:

Rent 1600
Apartment monthly costs + gas + electricity + water + city taxes (avg) 240
Avg monthly baby expenses 30 (counting government children allowance of 60EUR/month, see https://www.svb.nl/int/nl/kinderbijslag ... /index.jsp )
Healthcare costs 250
Cellphone + Internet + banking + insurance 60
subscriptions (education, entertainment) 25
Daycare (including tax rebate kindertoeslag, see Dutchgirl answer) 1000
Food and house supplies 300
Transportation (transport of an adult, sometimes two adults + baby in public transport until we can ride safely with baby on a bike. It also includes bike repairs) 188
Clothes/shoes adults budget 40
Entertainment budget (coffee, lunches, outings, games, etc) 100

Besides the rent, I think the hit in our income becomes us working each 1 day less a week + the daycare costs. However, I could be overlooking something on the budget...
Commuting every day to Amsterdam and we kept renting, is it possible to rent in the free sector below 1200-1300EUR ? Moving could be worth the effort if it could save us 600-700EUR off our housing costs, I don't know if it's doable...

[DutchGirl]

So total monthly expenses 3893 if I used my calculator correctly.

Daycare is a lot of money, I assume it's for three days per week? So I guess someone is taking good and professional care of your child for 120 hours per month on average for 1000 euros, so 8 euro per hour-ish. Of course, this expense is temporary, when the child goes to school there may still be some afterschool care-costs, but they will be much lower.

What's your income like?

As for paying asset tax... There's one other good issue that I didn't tell you about yet. It will make the world of difference to your plan. (And mine).

Say you indeed save up 300k euros as a couple, and then you quit working. So your taxable income drops to 0 euros. Your asset tax on 300k as a couple is 2132 euros. However, you both have a tax credit of 2265 euros in 2018. So your taxes are 2132 euros, but then you get to deduct 4530 euros from that, for a real tax rate of... 0 euros.

[firerufus]

I am living in Germany (Berlin) and Day Care is free here. Isn't it the case in the Netherlands as well? And with day care, I mean "Kindergarten" starting age 1. You may have to pay for food (around 40 bucks a month), but that's it. So you would save around 900 bucks over here.

The costs in Berlin, if you move now with a kid, are pretty much the same otherwise.

My wife and me (+ child) are aiming for a 2800 Euro budget a month, and we mostly hit it. I work in IT, she is a teacher, so we can save a bunch with this constellation and high rental cost.

[DutchGirl]

@Firerufus: the amount of subsidy for childcare costs depends on the parents' income. For a lower income, a high percentage of the care is paid by the government/taxes. For a higher income, less subsidy or no subsidy is given.

[eregal]

Daycare is a lot of money, I assume it's for three days per week? So I guess someone is taking good and professional care of your child for 120 hours per month on average for 1000 euros, so 8 euro per hour-ish. Of course, this expense is temporary, when the child goes to school there may still be some afterschool care-costs, but they will be much lower.

@Dutchgirl I totally agree. kinderopvang, (and I'm factoring in the kinderopvangtoeslag), is very expensive! If we didn't have to worry about the career hit of not working for 2-3 years, economically it wouldn't be that much of a difference.

The waiting lists can take one year or sometimes more to actually secure a place in a daycare in Amsterdam, so I don't think competitive prices are a factor for them. In the standard contract we're in, for one day they charge 11 hours for each day... I'm investigating a bit to see if I can get a different kind of contract, but I'm not hopeful it get be a lot cheaper than that. With the kinderopvangtoeslag (which depends on the income), that's where the 1000EUR comes from.

On the other side, kinderopvang's seem to be heavily regulated, requiring a maximum of babies per carer at all times, four-eyes policy, a certain educational level for carers, so yeah, I hope I am paying for good and professional care.

@firerufus that's interesting indeed. Is the daycare free no matter what the family income is?