Childcare sticker shock! Here are four ways to lower your costs
Childcare is expensive, just ask any parent. A survey by Care.com says childcare is not affordable for 7 out of 10 American families. One in three families are also spending 20% or more of their household income on childcare. Kerri Swope, vice president of Care.com Homepay says the inability to afford childcare is affecting families in various ways. Parents say they are saving less money and making major budget cuts. Some are choosing to wait longer to have kids. Couples are also experiencing tension in their relationship. Swope highlights four things parents can do to ease the stress and the sticker shock.
Budget for baby
Childcare is the number one cost that surprises families when they have children. Care.com says to manage those costs, 68% of families are starting to budget for the first time, compared to 58% in 2014. However, 62% don’t start budgeting until the baby arrives. Swope says families should consider how much childcare will cost the moment they think about having a baby. Add up all of your regular bills including your mortgage, cable, grocery bill, etc. After assessing your monthly household income, you can determine how much money you will have left for childcare. Are you having trouble finding extra money in your budget? She says cutting out that daily $3 latte may leave you with an extra $1,000 to put towards childcare each year.
Review your options
Once you know how much you can spend, choose the type of care that works for you. Is it a nanny? Daycare center? After school sitter or family care center? Swope says families are researching their options by talking to friends and family members, interviewing daycare centers and using free interactive tools online to determine the cost. Taking into account all of the care options, Care.com says in 2017, the average national weekly rate for a nanny was the most expensive at $580. The least expensive was a family care center at $195. If you’re going to hire a nanny, Swope says don’t forget to incorporate the “nanny tax” into your budget. The IRS requires anyone with household help such as a nanny to pay taxes.
Take advantage of tax breaks
Swope says tax breaks can save families anywhere from $600 to $2,300 dollars a year depending on their situation. Swope says flexible spending accounts allow families to set aside up to $5,000 before taxes to cover costs for things such as a nanny, daycare center or preschool. The child and dependent care tax credit can save a family up to $1200 a year. You can fill out the application for the tax credit when you file your personal income tax return every year.
Speak to your employer
Swope says more companies are seeing the need to incorporate family-friendly benefits to recruit and retain talent. If your nanny is sick or on vacation, backup childcare assistance may be available. Instead of working full-time, your employer may offer flexible work arrangements and the ability to work remotely or part-time. Some employers have also established affinity groups for parents dealing with the same experiences.
“Employees are definitely wising up to the importance of these benefits and it is playing into people’s decisions on their careers and the jobs they choose to take,” says Swope.
Linda Bell joined FOX Business Network (FBN) in 2014 as an assignment editor. She is an award-winning writer of business and financial content. You can follow her on Twitter @lindanbell.