How to Afford Childcare – 5 Tips to Drastically Cut Costs + Save Money
With my letter of intent deadline hanging over my head, I sat down to call daycares.
It turned out the only daycare with an opening, would cost $2,700 a month for my infant and toddler. When I broke down my full-time income with this cost, it didn’t add up. More than half my salary would go to childcare.
Childcare can be an extreme cost for most families.
Maybe childcare costs are crippling you. Or maybe you only want some cushion in your finances. Either way, there are ways you save money on childcare or eliminate the cost altogether.
How to Afford Childcare
Tip 1: Does This Make Sense?
Before we look at anything else, we have to consider the obvious question. Consider this for a minute — logically, not emotionally. Does it make sense for you and your spouse to both work?
How much do you make? How much do you pay for childcare?
If either of you makes less than you’re paying in childcare, that person shouldn’t be working. Don’t forget to consider the cost of gas, lunches out, and a work wardrobe.
Do the math on this and if it doesn’t work, drop daycare and stay home. You can find a side job to do from home to bring in some extra income. You’ll come out ahead with this option.
Tip 2: Get Creative
If neither of you can stay home altogether (I understand), try getting creative.
Ask yourself these questions:
- Can I adjust my (or your spouses’) hours so my children need less time with care?
- Do I have a family member who might be willing to help out one or two days a week?
- Can I (or my spouse) find a job that pays more and where I can work fewer hours?
- Can I (or my spouse) work from home?
- Can I do something from home to replace some or all of my income?
- Can you work different hours than your spouse?
These are big questions and they do require rearranging your life. This may or may not be an option for you. But it’s something to consider. It also may not be an option now but is something you can work towards.
Look into part-time childcare options.
Even if you don’t make as much as before, you may still come out ahead if you can cut childcare costs.*
After realizing how much we needed to pay for daycare, I started to search for a better solution. It broke my heart to leave my kids and killed me to pay more than our mortgage to do it.
Instead, I considered other options. In the end, I found a part-time job close to my hourly wage. I tried not to overlap as many hours as possible with my husband’s hours. And we hired a part-time nanny.*
The cost of a part-time nanny was about half the cost of full-time daycare. With this (major) adjustment, I brought in about $500 less than my full-time salary (- childcare).
We loved our nanny. If she had worked out long-term, we would have been happy with the $500 deficit, even with the financial strain.
But when our nanny left, I ended up reevaluating things again.
I found a home daycare with a part-time option. I adjusted my hours at work and put my kids in daycare 2 days a week. To avoid cutting my hours, I found a family member to watch them another day.
|Full-time Daycare (5 days a week)||Nanny Part-time (20 hours a week)||Part-time Home Daycare (2 days a week)|
|$2700 a month||$1350 a month||$675 a month|
So without cutting my salary, I cut daycare costs in half again. Covering the $500 deficit and bringing in an extra $175 a month (above my full-time salary).
The best part? These adjustments allow me to spend more time with my kids!
As always you need to consider your salary to determine whether or not this will work for you. Here are a few examples of the scenarios I’ve outlined.
|Full-time Salary at $4000 a month||Part-time Pay at $2000 a month||Part-time Pay at $2000 a month||Freelance or Flex Work at $1000 a month|
|Daily Hours You’re Out of the Home||8-9||4-5||4-5||4-5|
|Total Pay after Childcare Cost||$1300||$650||$1325||$1000|
Note: Not all daycares offer part-time options. Make sure you secure one before you cut days.
Tip 3: Rely on a Family Member
When considering how to afford childcare, many parents find a family member to watch their children as an alternative to daycare.
Even if your family member can’t commit full-time, maybe they can do one or two days a week (like ours). This can help cut down your childcare cost.
If You Can’t Afford It
Perhaps you’ve run the numbers and you need your full-time income. Or maybe you’re set on having your kids in a specific daycare.
Don’t worry. I still have a few tips left to help you save.
Tip 4: Government Assistance
If you’re considered a low-income family or a mom who needs care so she can go to school, you may be eligible for government assistance programs.
These programs vary by state in the U.S. Search for your state here to see available programs. These may provide daycare for free or at a deep discount.
If you’re a college student, there may be a daycare on campus you can take advantage of for free. (I work at a college and they offer free on-campus daycare for students with children. Or vouchers for discounts at nearby daycares.)
Tip 5: Tax Breaks
You can utilize a few tax options to help alleviate the cost of childcare.
Dependent Care FSA
If your employer offers a Dependent Care FSA account, take advantage of it. (Check with your employer. I worked for 9 years for an employer and had no idea they offered this.)
This gives you up to $5,000 of your income tax-free for childcare.
Note: If you’re a higher-income family (and in a high tax bracket) or you qualify for a lot of tax credits already, this will be your best savings option.
How it Works
Each month the amount you decide will be deducted from your paycheck (before taxes) and put into an account. To get this money back, you have to submit a claim. You must provide an invoice for childcare.
Once approved, you will receive a disbursement for the exact amount. This disbursement can go directly to the childcare provider or to you.
Note: You cannot use both FSA funds and claim the Child Care Tax Credit (below) for the same funds. If you pay over $5,000 in a year, you can use both.
Child Care Tax Credit
Families who pay for childcare can claim up to $3000 for one child ($6,000 for multiple children), for the Child Care Tax Credit. You will receive a tax credit for up to 35% of the childcare cost claimed (up to the maximum amount) (IRS).
Note: If you pay more than $5,000 in childcare expenses in one year, you can claim the rest as a tax credit. For example, if you have two children and you pay $8,000 a year for childcare. You can put $5,000 into an FSA and claim the other $3,000 for the Child Care Tax Credit.
Childcare can be a huge cost. It can eat up the income necessary to provide for your family. If you pay more than your mortgage for childcare, I hope these tips on how to afford childcare help you evaluate the cost and save money. Whether you do something drastic or you take advantage of savings options, there are ways to make childcare more affordable.
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