I do not have a PhD, although I did once consider pursuing one. Why? Because being a college prof is reasonably flexible and most universities have decent benefits and leave policies. It seems to me one of those jobs that is fairly compatible with having a family to look after.
Why are you bent on being a SAHM?
I am a WOHM with a PhD, three kids, and a tenured academic position. You know what the academic job market is like. The idea of getting a degree and taking a few years off and then expecting to be competitive for tenure track positions is not a good one. It might happen to one in ten thousand people, but it's not a "plan." Far better to stop at the Master's, have your kids, go back for the PhD and re-apply later.
Every assistant professor job we have has at least two hundred qualified applicants, most with glowing letters, publications, presentations, post-docs, etc. Someone with a dated degree and a few years teaching in the community colleges a few years back is going to have a hard time getting through the first round of reading applications. And remember that your advisor, even if he or she thinks you walk on water now, will likely have some freshly-minted PhD students on the job market at the time you decide to go back. Guess whose letters are going to be stronger?
Here's another little secret: There is NO time when your kids will be "old enough" that you will be able to ignore them for a few years while you concentrate on rebuilding your career. The first year or so of parenting,is completely consuming and life-altering, but you CAN take a year off or in most places, get your tenure decision delayed by one year while you are learning to combine parenting with your career. After that, it is no easier to parent a seven year old while working than it is to parent a two or three year old. In some ways, it's even harder.
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Two year olds are much more tiring to corral while awake than are 7 year olds!
I think that all depends on the child though. My dd is 9 and only does 2 "extra" things so running around with her is not that bad. Once my ds starts doing things next year, it will then get a little more hectic.
About the sleeping issue...my ds still, at 4 1/2, gets up in the middle of the night so it is a rare occassion I sleep through the entire night. Then both of them get up anytime between 5am-6am-uggghhhh!!!