Creative Ways to Reduce the Cost of Child Care

Before you go, we thought you'd like these...
|color|horizontal|interior|center|education|day care|creativity|childhood|child|boy|girl|caucasian|people|painting|red|green|bla
Getty Images
Diapers: check. Stroller: check. Onesies: check. You're all set for your baby, right? But what about child care?

A recent survey by Care.com, a website for finding and managing child care, found that 75 percent of American families say they were "surprised or overwhelmed" by the cost of child care and 42 percent) don't budget for it. According to the company, the average family spends approximately $18,000 per year on child care -- often their single largest expense.

Sheila Lirio Marcelo, founder, chairman and CEO of Care.com, says for many families, child care accounts for a bigger portion of their income than their food and housing. "According to our research, the average family spends 18 percent of its income on child care," Marcelo says. But new parents may not know the scope of expenses they need to budget. What's more, the survey found that 52 percent of families aren't aware of tax breaks for child care expenditures.

Resources for Child Care Costs

The best budget for all things -- especially big expenses like child care -- is an accurate one. The first step, says Samara Gonzalez, a certified credit counselor with ClearPoint Credit Counseling Solutions, is to research cost ranges for different types of child care in your area. "Sometimes this involves word-of-mouth as well as calling around to get a sense of the costs," says Gonzalez.

Those costs may seem overwhelming, but there are resources that can make them more manageable. Employee benefits, tax breaks, and subsidies can reduce your out-of-pocket child care expenses, but you need to search for them.
  • Flexible Spending Account. If your employer offers an FSA ,you can set aside up to $5,000 of your salary before taxes to use for child care expenses. "This simple step saves the average family about $2,000 per year," says Care.com's Marcelo.
  • Employee benefits. Look into your options for on-site day care or a flexible work schedule to reduce your child care costs. Marcelo says you should ask your employer's human resources department about possible benefits, such as child care reimbursements and resources to help you find a nanny or back-up care.
  • Child care tax credit. "If your company doesn't offer an FSA, you can still get the child care tax credit, which lets you itemize up to $3,000 in expenses per child, per year on your tax return up to an annual cap of $6,000," says Marcelo. You can find out more information about the tax credit on the IRS website.
  • Subsidized care. Depending on your income level, you may qualify for subsidized care. Ask providers if they offer fees based on your income.
Types of Child Care

While nannies, au pairs, day care centers and in-home day care centers are among the most common methods of child care, parents can devise alternatives.

Some parents rely on friends and family who are retired or unemployed; others are able to work out a flexible schedule or telecommute to reduce or eliminate child care expenses, says Rebecca Gershowitz, a counseling manager at ClearPoint. Another option is to look into sharing child care services -- such as a nanny -- with other parents. "Others may barter for skilled services they can provide, such as hairdressing or carpentry," she says. "They may also employ church-operated day care centers and schools in order to take advantage of need-based financial assistance."

If you're thinking of a more traditional child care system, here are some pros and cons:
  • Nanny: Nannies are professional caregivers who come to your home and plan activities specific to your kids, but this tends to be the most expensive option, says Marcelo. "You should definitely do the math, though; when you have two kids, a nanny might be the cheapest option," she says.
  • Au pair. Marcelo says an au pair works best for older children, since these tend to be young people from another country with varied experience with kids. She says an au pair from an agency will generally cost you $360 per week as a stipend, plus room and board.
  • Day care center. This can be more affordable than having someone in your home, but the downside is that your child gets less attention and you'll have less flexibility.
  • Home day care providers. Marcelo says home day care, where one or more caregivers watch a small group of kids in their home, can be the most affordable option for families. She recommends that you check out the program to be sure it is state accredited.
"The in-home vs. day care facility was the biggest decision I had to make when I had a child," says Gershowitz. "For those who opt for in-home day care, there are other challenges, such as that many are not tax-deductible. Also, if the provider is sick, you're stuck scrambling to find someone else to care for your child for the day. Some facilities provide temporary care for the day, but that's often pricey. One I checked into was $70 a day. Or you have to call out from work and lose income if you don't have vacation time."

One of the most cost-effective ways to provide child care is to organize a babysitting co-op with other parents. She says some ClearPoint's clients have found it more lucrative to start a day care business rather than return to a traditional job.

Finding the right child care is not just a financial decision, but an emotional and lifestyle one as well. Researching your options and determining what's realistic for your budget will help ensure that the decision you make is the best one for your entire family.

Michele Lerner is a Motley Fool contributing writer.

Creative Ways to Reduce the Cost of Child Care
For many employers, open enrollment season for some benefits happens in October. This usually sneaks up on some people, who scramble to decipher benefits and make elections last minute. Although you won't be able to see the options until the enrollment period opens, take time now to review your benefits. Are you taking advantage of any 401(k) matches? Are your fully funding your Flexible Spending Account? What about employer offered life and disability insurance? (A fun infographic from the Council for Disability Awareness shows your risks). Maximize your benefits and don't leave any money on the table.
Back-to-school time can be expensive if you're not prepared. Money is spent on clothes, books, supplies and technology -- and that's before the doors to the classroom have even opened. Before hitting the stores, do these two things:
  • Conduct an online search for "coupon code" along with the name of any store you'll be shopping at. Typically you can find some great online deals.
  • Get a list from you class or teacher of specific type of notebook, calculator, etc. required. If you can't get child's "must haves" from ahead of time, buy just the bare minimums until school starts and the list is available.
It's hard to think about the holidays when we're just making it through summer, but now is the time to build up a financial cushion. Set yourself up with an automatic transfer to a separate savings account and participate in the Holiday Fund Money Challenge to build up a savings of $450. How much do you need for the gifts, travel, parties, entertaining, food and other holiday activities you anticipate? Planning will help to ease the stress that comes around the holidays.
In lieu of scrambling at the end of the year to make contributions to retirement accounts by Dec. 31, double-check your contributions now and determine if there's room in your cash flow to allow for an increase to possibly max out by year end.
Summer is a typically a time of transitions. There are weddings, moves to new homes, possibly a new family addition and more. If summer is the time when these events take place, fall should be the time to take stock of how they're panning out. If you're recently married and haven't already, now is the time to have the money talk with your spouse and make decisions about spending plans, merging (or not merging) accounts, beneficiary updates and more. If you've moved, check out how the new location has affected your cost of living spending in terms of activities, gas costs, groceries and more. Ultimately with any transition, you need to review your spending plan and determine what areas (if any) need to be adjusted.
If you're lucky enough to live in one of the states that actually experiences seasons, fall is the time to prep for energy savings by caulking and weatherstripping doors and windows, turning your thermostat back for a fixed period each day and insulating your attic, basement or outside walls.
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION

Read Full Story

People are Reading

The Latest from our Partners
1 - 3 of 15