Childcare Options and Costs

One of the hardest things to do as a parent is to leave your child in someone else’s care so that you can go back to work.  Sometimes, preparing for the cost of that care can be nearly as difficult.  Some care centers can cost more than in-state tuition at a university.

More than sixty-five percent of American children have two working parents and many children will be in a child care program for much of their youth.  More than twenty percent of the family’s income can be  spent on child care over the course of the year and this cost can greatly influence career decisions.  Forty-two percent of American families rely on a relative or relatives to care for their children.  This can have a  significant upside -- allowing for one-on-one care with a familiar caretaker, often in a familiar environment and relatives can often provide a more flexible schedule.  One down-side is that utilizing a relative for childcare can put a strain on inter-family relationships.  In many cases the relative(s) taking care of the child are grandparents and the increasing mental and physical demands of a growing child came become too much.

Hiring a nanny or an  au pair can be a good option.  It offers many of the same advantages as relative care, with mostly flexible hours, in-home care and one-on-one attention, however, it is important to note that hiring a nanny or an au pair is not necessarily as straight-forward as it seems.  These types of caregivers are often the most expensive, since  parents will become the employer.  This  means conducting interviews/background checks/reference checks, preparing a contract, paying household employer taxes, potentially providing benefits, and arranging for back-up care if the nanny or au pair is ill.   It is costly, but  often you get what you pay for , as over fifty percent of nannies or au pairs have a degree in early childhood development or other child-related fields.  This may provide your child with a more educational or well-rounded experience.  In some cases,  if you work it into the contract, many will provide light housework in addition to childcare.

If you do not have a relative near-by or willing, and a nanny or an au pair is out of your price range, many parents opt for using an organized childcare facility.  These centers provide licensed and sometimes accredited places where children have the opportunity to experience things outside of the home and socialize with other children in their age groups.  Many centers include education, field trips and other programs that may be of interest to you and your child.  These centers can be quite costly as well, and in-home daycares are often more affordable.  In home daycare is usually limited in age and number of children  to be cared for and are  subject to different regulations.  They may not hold the same level of licensing or accreditation as larger centers or private care.    The state generally regulates the ratio of children to adult caregivers based upon age of the child.

There are several tax benefits to paying for childcare, since working parents are eligible for a non-refundable tax credit of between twenty and thirty-five percent of their child-care expenses up to $3,000 per year for up to two children under the age of thirteen.  This credit is limited by the amount of income made by the parents and parents making less than $15,000 a year qualify for the highest bracket of thirty-five percent, with the percentage dropping every additional $2,000 until it reaches twenty percent at $43,000 a year.  The Dependent Care Flexible Spending Account is an employer sponsored account that allows the parent to pay for up to $5,000 per household per year of child-care expenses with pre-tax dollars.  This means that a portion of the parent’s wage is taken out prior to being subject to federal, state, Social Security and Medicare taxes.  Keep in mind that you cannot claim both benefits for the same child care expenses.

When looking at childcare options, it is important to first determine your budget.  How much can you spend on childcare?  How will that change with one or both parents able to work?  Be sure to look into what savings options your employer(s) may have and if your employer has an FSA plan, calculate out how much you can set aside.  If your employer doesn’t have a plan, see what child care credits your may be able to take advantage of.  Do the research by interviewing the various childcare options in your area and seeing what may then fit into that budget.  Give yourself plenty of time, as this is a big decision and one that shouldn’t be rushed.    If you do choose to hire a nanny or au pair, make sure you understand the regulations that you must follow when adding a household employee.   Determine if full time or part time care is what you need, of if you can work a flexible schedule that allows for a few longer days but reduces the need for a full week’s worth of care.  See if you have friends with children of similar ages that may be interested in sharing a caregiver.  Look into seeing if you can work remotely a few hours or days a week.  Or perhaps find a side hustle that allows for extra cash without overtaxing your resources.

Childcare is a situation full of emotional and financial pros and cons.  It is important to enter into the decision making process fully armed and ready.  You should invest in a care system that works best for you and your family, while still providing the hours that are needed at a cost that works.