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How to budget for child care

How to budget for daycare expenses
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Tip: A dependent care flexible spending account offered through your employer can save you taxes on your child care expenses.

Maximizing your budget

  • Dependent care flexible spending account (FSA): Parents may be able to write off up to $5,000 a year in taxes for eligible child care expenditures. And many employers offer FSAs specifically for child care purposes. Employees who sign up can have money automatically placed in the FSA from their paychecks, pre-tax. FSAs force you to set aside money from each paycheck for child care while also saving you some money in taxes.
  • Ask for discounts: No one likes going hat-in-hand. But a high-end preschool or a church child care center may have funds set aside to cover discounts. You might be surprised how infrequently people ask. There may also be discounts for the military, or discounts if you join a sponsoring organization, like a religious institution or a community center. Some child care centers work as cooperatives, where parents devote a limited amount of unpaid time to helping the child care center run, lowering operating expenses and tuition.
  • Get creative: Maybe a friend also has a newborn, and together you hire someone to watch both kids in a nanny share. Perhaps you and your partner stagger your work schedules — either working a four-day week or working different hours — so you don't need as many hours of child care per week.

Weighing one parent staying at home

Sometimes, it might make sense for one parent to stay at home with a child, but in the current economy that's increasingly unlikely.

According to the Bureau of Labor Statistics, 48% of married couples with kids under 18 see both husband and wife working, while 26% having only one employed parent.3 There are a lot of couples with two working parents because today's family expenses are larger than in years past. A 2015 U.S. Census Bureau survey found that families in the southern U.S. paid an average of $890 per month ($10,680 yearly) for their mortgage — out of an average annual household income of $62,500.Contrast that with the average annual cost of infant child care in Georgia at $7,600, and you can see how quickly the numbers add up.2

But some families find that one partner's income barely covers child care, once taxes are accounted for. Then they start asking, is it worth it to work?

If you're thinking about having one parent stay at home, here are some things to consider:

  • Logistics and stress: If you're stretching out commutes for child care drop-off, getting home late, waking up at 5 a.m. with a baby, and getting in bed after midnight due to work, odds are no one is happy at home. Is the income worth the headaches?
  • Professional losses: Studies have shown that women who stay home for a few years lose out on significant earning potential, as CBS News notes.When you re-enter the workforce, you've lost years of seniority, promotions, and benefits like 401(k) matches that an employer might offer. Even if child care eats up most of your take-home pay, consider the long-term impact.
  • Hard work: Yes, long hours at the office aren't easy. But staying home with kids is hard work. Some parents struggle with isolation, or miss the intellectual stimulation of their job. Others embrace the chance to care for their family in ways they couldn't if they were working full-time. Consider your personality, your values, and how staying at home might work — or not work — for you.

Ultimately, no matter what your family decides, or how much it costs, there's a silver lining — you don't have to pay for child care indefinitely. Unless you plan on private school tuition, by age 5 most kids are in public school — earlier for districts that offer pre-K programs. Just like diapers, writing those child care checks won't go on forever.

Look here for budgeting tips to help you save money in preparation for child care expenses.

Important Disclosure Information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. Childcare Aware of America, "Parents and the High Cost of Child Care: 2017," http://usa.childcareaware.org/advocacy-public-policy/resources/research/costofcare/ accessed Sept. 6, 2018 Back
  2. Economic Policy Institute, "The cost of child care in Georgia," https://www.epi.org/child-care-costs-in-the-united-states/#/GA, accessed Sept. 27, 2018 Back
  3. Bureau of Labor Statistics, "Families by presence and relationship of employed members and family type, 2016-2017 annual averages," https://www.bls.gov/news.release/famee.t02.htm, accessed Sept.27, 2018 Back
  4. Value Penguin, "Average Monthly Mortgage Payments," https://www.valuepenguin.com/mortgages/average-monthly-mortgage-payment, accessed Sept 27, 2018 Back
  5. CBS News, "Staying home to parent can cost more than just salary," https://www.cbsnews.com/news/staying-home-to-parent-can-cost-more-than-just-salary/, accessed Sept. 6, 2018 Back