I work with a lot of young families, and almost without fail, there are two areas that stretch their budgets thin: student loan payments, and childcare coverage. We've spent a decent amount of time on student loans, but up to this point the childcare conversation has been neglected a bit. But today we change that! Check out these 8 tips for managing your childcare costs:
1. Look for a sponsored program
Certain states provide assistance to lower-income families through programs like school vouchers or the Head Start program. Depending on your area there might also be sponsored Pre-K programs for children as young as 3 years old. Military service members could also qualify for assistance with childcare expenses. The point is, programs are out there. Check out services like Child Care Aware of America to see if you can find offerings in your area.
2. Ask for a Fee Schedule
Many daycares have services that you might believe are all part of one package, but in actuality, are charged separately. Some facilities might charge separately for providing lunch, or field trips, or supplies that you could pay for on your own. By requesting a fee schedule for these items, you may be able to negotiate having your bill reduced by opting out of certain offerings. If packing your child's lunch can save you $25/week, it's worth looking into!
3. Start a babysitting Co-op
Do you have a group of friends or family members you trust who not only have young kids, but also a similar parenting style? Look into starting a babysitting co-op, where members get hours credited to and debited from their account based on shared babysitting duties. Did you watch your and your neighbors two children for 3 hours? You get those credited to your account. If a friend from church babysits your children for 4 hours the next week, you are now at -1 hours, meaning you must babysit for at least two hours before you can ask another member of the co-op to babysit for you. This may sound a little too strict, and if it does, the great thing about co-ops is that you can create your own rules and barter system. These groups are becoming more and more popular, and there are dozens of sites like Baby Center and Sitting Around that help walk through the process of how to start one of your own.
4. Have multiple children? Consider a nanny or an Au Pair
If your childcare provider doesn't provide a multi-child discount, research the potential cost benefits of hiring a nanny or an au pair. While it may sound like something reserved only for the bourgeoisie, the costs of having more than one child in daycare/private school can sometimes make the cost of a nanny more attractive in comparison. Even if the costs are the same, there may be additional benefits to hosting someone in your home (decreased commuting costs to and from childcare, help with other household chores, etc.) that should also be considered. Concerned about your applicants' qualifications? There are a number of services such as Care.com or the International Au Pair Association that can help vet candidates so that you feel comfortable with who you're letting into your home.
5. Check for tax breaks
A Dependent Care Flex Spending Account allows you to set aside funds for childcare that reduce your taxable income. In 2018, single taxpayers can put aside up to $2,650 to pay for a number of eligible items related to childcare. Married taxpayers filing jointly can contribute up to $5,000. Additionally, talk to a CPA about the expanded Child Tax Credit, which is now up to $2,000 per child for qualifying families. If you have to pay for childcare, you might as well see if you can get a break on your taxes by doing so!
6. Use Your 529 Funds
If you have children that are kindergarten age, new tax laws have opened up an opportunity to help save for early schooling costs. Starting in 2018, parents whose children have 529s - accounts which have historically been reserved for college funding - can now withdraw up to $10,000/year for K-12 expenses as well. Money contributed to 529s is invested and grows tax-deferred, meaning no taxes are owed each year for things like dividends and interest. When you take money out of 529s for approved expenditures, such as tuition or school fees, you don't have to pay income taxes on these funds either. Anyone can contribute money towards a 529 for your child; so if you have other family and friends that love your little one as much as you do, tell them that you'd rather have contributions towards their 529 than giving them another stuffed animal for their next birthday.
7. Explore nonprofit services
Check with your local church and nonprofit community to see what childcare options their organizations might offer. Rates at these nonprofit organizations could be lower than the privately owned daycare services you're currently using. Many churches will allow non-members to pay for childcare, and may even offer a discounted rate to members (but don't let that be the reason you join). Your local YMCA might offer services as well if you're a member, or summer camps that could give you a week's reprieve from daycare at a lower cost to your household.
8. Consider Part-Time or Contract Work
I'm not here to tell anyone that they should or shouldn't stay at home. As a matter of fact, I think the decision to become a stay at home parent is one of the toughest emotional decisions that a person can make, so we won't go near the emotional element today. From a financial perspective, parents I know that have made this decision primarily do so when there is little to no difference between what they earn and what they pay out in childcare. Add in the lack of flexiblity that comes with managing their drop-off and pick-up, and it's easy to see why some choose to leave the workforce to take care of their children. They DO want to work, they just don't want to sacrifice flexibility and LOSE money to do it. Parents in this situation COULD consider switching to part-time with your current employer, or working with a staffing agency that specializes in placing contracted employees. Take a graphic designer, for example. Rather than working a traditional 9-5, they might instead contract their services on sites like Fiverr or 99Designs, where they can bid for jobs they like and fit into their schedule. There are also plenty staffing agencies that companies will pay to provide temporary or contract workers for time-intensive projects. Should you find a staffing agency that will keep you on its roster, you could sign up for a brief contract gig, say 3-6 months, and then take as much time off as you need before accepting another opportunity.
I know, I know: you were expecting to see a trick that magically forced your daycare facility to slash their prices by 75%. I wish I had that ability, but at a certain point we do have to accept that it's hard and expensive to raise a child in today's society. But I do hope that a couple of these suggestions could maybe find some cost savings in areas you didn't expect. Because after all, every little bit helps when it comes to your financial plan!