Whether you are expecting a bundle of joy for the first time or you already have a few children, it can be difficult finding ways to pay for daycare.
As most parents will tell you, raising children is expensive, and child-care services can be a persistent challenge to find. To accommodate this necessary expense, you will probably have to weigh your budget against the best quality care you can find — a tricky balance.
Thankfully, there are several ways you can potentially make child-care costs less of a burden on your family’s budget.
Consider these eight factors when trying to help your family pay for daycare:
1. How much does daycare cost?
Daycare costs vary from one market to the next — and from one type of care to another — including at-home child care, community daycare centers or a personal nanny.
There is no hard rule on how much you should pay for child care, as this decision will be dependent on the level of care and your income. However, a 2020 survey from Care.com® found that 72% of surveyed parents said 10% or more of household income goes to child care.
The Care.com survey also found that the average weekly child care cost for one infant child sits at $565 for a nanny, $215 for a daycare/child care center and $201 for a family care center.
Over the last six years, this represents an increase of 20% for a nanny, 16% for a daycare/child care center and 58% for a family care center.
With these costs already demanding a considerable chunk of a family’s budget, and with them only expected to rise, it becomes even more incumbent upon parents to find smart ways to afford child care.
2. How to fit daycare costs into your budget
Maintaining a budget and sticking to it is a necessity.
Your budget serves as a real-time insight into how you spend your income — and it also provides valuable opportunities to figure out ways to save money.
Being a parent often involves making sacrifices for the sake of your family’s best interest. In the case of child care, this might mean that you have to cut an expense to cover daycare costs.
With your budget in hand, you can more easily identify those items that you can potentially trim back. This includes items like entertainment, shopping or dining out. It can also shed light on redundant purchases or ways to consolidate existing expenses and debts.
A checking account with no monthly fees can assist with keeping to your budget. These accounts offer online tools and instant access to your daily balance to ensure you stay up to date with your expenses. You can also view, download or print 24 months of eStatements so you can track your budget over time to identify any spending trends you can potentially improve or change.
3. How can you reduce the cost of daycare?
There are handy and free interactive online tools you can use to calculate the costs for full-time child care, babysitter rates and even nanny taxes. Look for options that fit within your budget while still providing high-quality child care.
Another option to consider — if you have a job that lets you work from home — is to take advantage of this benefit, even if it is only for a single day a week. By doing so, you can keep your child home from daycare while you work, thereby saving some money on weekly costs.
Similarly, if you or your spouse can switch your work schedule or change shifts, you can potentially reduce the number of hours your child needs care.
Sometimes, in a two-parent household, one spouse’s entire weekly paycheck goes directly toward paying for daycare. If this is the case, run the numbers to ensure it makes financial sense for both parents to work.
You might want to consider the upside to letting the spouse with less take-home pay become a stay-at-home parent or switch to having a part-time job. Having one parent staying home to raise your child or children includes the added benefit of nurturing a healthy relationship.
4. Employment benefit plans
Some employment benefit plans include child care flexible spending accounts. These accounts let you place pretax money aside for use in child care costs, allowing you to save an amount equal to the tax rate on that income.
Additionally, many companies have partnered with local daycare facilities to support families with children. In some cases, these partnerships have even yielded discounts on costs to further help parents pay for this expensive service.
Check with your company’s human resource department to learn more about whether these options are available in your employment benefit plan.
5. How do you know if you qualify for child care assistance?
In its efforts to help moderate- and low-income families raising children, the federal government also offers a number of programs and financial incentives.
The federal government grants each state funds for state-run child care subsidies, vouchers and fee assistance programs. These are given out to low-income families who need assistance to pay for child care while the parents work or attend school. Eligibility requirements vary between states but ChildCare.gov has resources for each state’s programs.
The Head Start and Early Head Start programs provide mental, social and emotional development services to help children from birth to age five begin the process of starting school. The federal government bases eligibility requirements for these programs on the family’s income level.
You can also see if you qualify for state-funded prekindergarten for your child. These state pre-k programs serve children ages 3-5 years old, and focus on early education and school preparedness.
There are around 400 local Child Care Resource and Referral (CCR&R)® agencies across the U.S. that can assist in locating state pre-k programs where you live. These agencies help families find the best child care options where they need them most. The CCR&R also helps you find your state’s resources for child care, financial assistance and health and social services.
6. Claim tax credits, if possible
Another option from the federal government includes the Child and Dependent Care Tax Credit. This credit may reduce the amount of taxes you owe, and may even potentially result in a tax refund for your family. The credit does come with specific eligibility requirements to claim the tax credit, including:
- You must have earned income.
- You must be the parent or primary caregiver of the dependent claimed.
- The childcare services you paid for must have been purchased so that you could either work or search for employment.
- In order to claim the child as a dependent, he or she must either be disabled or under the age of 13.
- Whoever provides the childcare cannot be another dependent, your spouse or a parent of the children. This applies even if you are paying that person a salary.
Additionally, earned income tax credit is available for people with moderate and low incomes.
You can learn if your family is eligible to claim the Child and Dependent Care Credit through this 10-minute interactive interview application from the IRS.
7. Work with other parents
More often than not, other families are struggling to find ways to afford child care as well.
Consider asking friends or fellow neighborhood parents if they also need child care services. You can potentially work with these other parents to share childcare duties with you.
For example, you can offer to watch their child with your child on days when you can, while they care for your child on days when they can. This can be mutually beneficial for both families, while also fostering a friendship between the kids.
8. Leverage the gig economy
There are also other ways to make additional income to pay support childcare costs. The recent rise of the gig economy has provided additional routes for people to earn extra money on the side.
The gig economy is the name given to the ecosystem of part- and full-time earning options that typically do not require a full interview or even necessarily being “hired” for the gig. Digital apps and the ease of transferring info and money have facilitated the ease of signing up for one of these gigs. In many instances, these gigs allow you to set your own schedule and work when things are convenient for you — or as convenient as things can get when raising children.
Signing up and driving for a ride-share company requires little more than a clean background and your own car.
Another example includes setting up shop on an online marketplace for unique and creative crafts and goods. There are several easy-to-use platforms, like Etsy®, that let you sell items you craft and produce, whether it is home decor, clothing, art or other craft supplies and tools.
These gigs usually do not require any long-term commitments, and you can stop doing them whenever you want.
Mobile and online banking solutions can be an invaluable tool during this difficult process. At Comerica Bank, we offer robust mobile and online banking tools that help you manage your budget and provide you with critical services when you need them most. Find out more about how our Access Checking accounts can help by clicking here.
