Child care expenses are ridiculous! There, I said it. I can’t tell you how frustrated I am with all the numbers and reports I have been glaring at with an evil eye. Most of what I found suggests that we have to pay ungodly amounts of money to ensure our children live to see another day while we’re at work trying to make money for all the other expenses life requires of us. However, the most hopeful thing I learned is that we do have options. Options = choices to make. We have to choose the best options based on what we can actually afford, as well as what is right for us as individuals and as a family.
Before we can even begin going over our options, we need a starting point – our budget. We need to figure out how much we can afford RIGHT NOW. We can juggle with numbers later, but we need a ballpark figure. When budgeting for something like this you want to do things just a bit differently than what I have outlined in Life Skill: Budgeting – The Baby Step Budget. You still want to write it out the same way, except you want to write it out for a full month.
The best way to get an accurate estimate of your monthly income (if it’s not salary based) and expenses is to pull out your pay stubs and bank statements from the last 3 to 6 months (I usually only go back 3 months). You need to find the average of your income over that span of time and the average of EACH expense over that same time period.
EXAMPLE for 3 month period:
July Income + June Income + May Income = $$$/3 (months) = Average Monthly Income
July Groceries + June Groceries + May Groceries = $$$/3 (months) = Average Monthly Grocery Expense
I know, you hate me right now because you just realized how time consuming this will be, but it’s truly the best way. As you find each average, write them down on your piece of paper, budget template, etc. Now subtract your average monthly expenses from your average monthly income. That’s about how much money you have for child care, at least for now.
If the number you’re looking at is disappointing, see about cutting back some of your other expenses (I think my next post will be about some specific ways to do this). I know for some of us cutting back on expenses may be nearly impossible. Don’t give up hope yet. You may find that you still have some options even with what you currently have.
Child Care Options
Speaking of options, now it’s time to go over them. First I want to go over the average weekly cost of each child care option (according to Parents and the High Cost of Child Care, 2014 Report, Child Care Aware of America), along with its advantages and disadvantages.
Day Care Center – $188: 1 Child; $341: 2 Children.
Advantages: Reliable, meaning there’s always staff available and they can’t call in sick. They have plenty of staff for supervision. Children get to socialize with their same or other age groups. Staff is trained in early education. They are licensed and regulated.
Disadvantages: Although there are recommended caregiver to child ratios, caregivers are still caring for more than one child at a time. It can be difficult to find a day care center, especially for infant care (they may not care for infants at all), as they tend to fill quickly. Children get sick more frequently and most centers don’t provide care when they are. They’re closed for most holidays. They have strict pick-up and drop-off times – you can actually get fined if you cannot abide by their times and even be “expelled.”
Family/Home Day Care – $140: 1 Child; $267: 2 Children
Advantages: Home environment with less children than a day care center, which provides more attention to your child(ren). It is less expensive than most other child care options. Children get to socialize with their same or other age groups. They’re usually more lenient about pick-up and drop-off times.
Disadvantages: There may not be any back-up if the caregiver is ill. Again, children get sick more often in group care. They may not have had formal schooling or training. They may not be regulated, therefore, there’s no one to supervise the caregiver. Licensing may not be required, but even if it is, it’s less stringent. Many will close for holidays and vacations.
Nanny – $477: 1 Child; $488: 2 Children
Advantages: More attention to your child(ren). They can be more convenient since they come to your home to provide care. Nannies are usually more flexible than day care centers and family/home day care. Your child(ren) is/are in a familiar environment.
Disadvantages: Very expensive. Unless you have a nanny-cam, there’s no supervision. Social activities for your child(ren) will have to be set up by you or the nanny. To hire a nanny legally, there is a lot of paperwork and taxes involved. You’re screwed if your nanny quits, gets sick, etc.
Relative Care – Possibly free – negotiable
Advantages: More attention to your child(ren). Your relative has a personal interest in your child(ren). You may share the same values. Usually very inexpensive, if not free.
Disadvantages: Potential employee-employer relationship establishment issues. You may NOT share the same values, causing conflict. Social activities for your child(ren) will have to be set up by you or the relative. No supervision or regulation. Older relatives may have a difficult time with toddlers.
Stay-at-home Parent – Free, but possibly with a loss of income
Advantages: No one can replace Mom or Dad. You get to be present for your child(ren)’s development and milestones. You are in control of the environment and quality of care. You get to skip out on explaining and reprimanding others on your parenting philosophy. You don’t have to struggle with your work and family time.
Disadvantages: Possible isolation and loneliness, especially if you are giving up a job/career you enjoy or don’t know other stay-at-home parents. Physical and emotional strain. Socialization for your child(ren) will have to be arranged by you. It can hurt your career and earning potential taking time off to stay at home. You lose income and benefits if you are currently working.
** Some other options to research: Babysitting Co-ops and Nanny-Shares. Baby-sitting Co-ops are FREE, but you have to be capable of watching other children as well, as you rotate and share babysitting duties with other families. Nanny-Shares are families who split the cost of a nanny.
Before you make a decision we need to go over some other options.
Options for Lowering Child Care Costs
Budget: Continue to budget! Keep track of your spending and try to find ways to lower your other expenses so that you have more money available for child care. Having more money for child care can give you more child care options. If you’re lucky and really enjoy and are comfortable with your less expensive options, still continue to budget! You’ll have more money freed up for your other needs and wants.
Flexible Spending Account (FSA): Also known as a Dependent Care Account. Find out if your employer offers this. An FSA allows you to put aside a portion of your earnings. The money that’s deducted is not subject to payroll taxes (which means about $1,000+ savings on your taxes). It can be set up to for child care for children under the age of 13 as long as they can be claimed as a dependent on your federal income tax return.
**Federally capped at $5,000 per year, per household. Married couples can each have an FSA set up, but your combined total can only be $5,000. Any withdrawals over $5,000 will be taxed.
**If married, both spouses must have an income EXCEPT if the spouse that is not working is disabled or a full-time student. If one spouse makes less than $5,000 the benefit is limited to what they earned.
**”Use it or lose it” rule: funds not used by the end of the plan year are forfeited to your employer. A plan may allow you to carry over up to $500 into the next year. So only put in what you will actually use.
Tax Credits: Known as the Child and Dependent Care Tax Credit. Again, this is for children under the age of 13 receiving child care. You can receive 20-35% credit on $3,000 of child care expenses for 1 child (max tax credit = $1050), but no more than $6,000 per year, per household of child care expenses can be claimed if you have more than 1 child (max tax credit = $2100). The higher your income, the lower the percentage you will receive, making this an optimum choice for lower income families.
**Tax credit lowers your tax liability dollar for dollar.
**You (and your spouse, if filing jointly) must be working or have earned income during the year unless disabled or a full-time student.
**A dependent or spouse cannot be the caregiver. If an older sibling/relative is the caregiver, they must be 19 years or older by the end of the year and cannot be claimed as a dependent.
**You have to identify the caregiver on your tax return.
**If you have 2 or more children and your child care expenses exceed $5,000 you can benefit from both an FSA and the tax credit, however, you will only be able to claim $1,000 of child care expenses for the tax credit. So you want to set aside the $5,000 in your FSA and claim $1,000 of child care expenses on your tax return for the tax credit to receive maximum benefits.
State Assistance: Because guidelines vary so widely, I’m going to refer you to some websites that will help you navigate and find resources for your specific state. State assistance is usually only granted to lower income families, but you want to check the numbers as to what qualifies for “low income,” as well as ask what other resources may be available in your state if you are deemed ineligible. Many workers in this field have their ear to the ground and are willing to point you in a helpful direction.
Office of Child Care (most assistance is administered through them and this link provides you with a list of contact information by state)
National Women’s Law Center (provides information on each state’s child care assistance policies)
**Check with your state’s social and health departments and agencies for funding as well.
Human Resource Department: Find out what other subsidies or benefits your employer offers to help pay for child care expenses. If they don’t offer any, find ways to get them to. You may want to consider finding a job that does have these kinds of offers (including FSAs).
**Also, check with your employer about flextime and telecommuting!
School: If you’re in school, see what kind of financial assistance they may have to offer. Some may be able to help pay for child care. If so, find out what it covers. Some schools provide on-campus day care at a low cost for eligible students – find out if you qualify! There are also grants out there for degree-seeking students that can help pay for child care costs. Your school can help point you in the right direction.
Scholarships: Some day cares provide scholarships to lower income families. Also, ask about their rates, they may offer a sliding-scale fee.
As I mentioned earlier, child care expenses are ridiculous, but we’ve got some options that can help us with those expenses. As you go over this information and do your own research try not to get too overwhelmed. Many of us have certain expectations of what life should look like or dreams of how it should be. It’s okay if we can’t hit the mark right now. Just be sure to look over each option (no matter how absurd it may seem) and plan it out as best as you can to find out what is really the best fit for your family. You really won’t know what doors are open to you unless you’re willing to turn all the knobs. What’s most important is that whatever decision is made works for you and your family.
Please leave any comments you have about your experiences with budgeting for child care, especially if I missed anything. Tips and tricks are always welcome, along with any questions you might have. Stay strong!