We often hear parents complaining about how expensive children are. Between food, clothes, and diapers, the cost of a child can add up quickly. Unfortunately, the expense only increases when you factor in the cost of child care. All too often the cost of daycare is overlooked and many are shocked when they discover real cost.
Did you know that Washington D.C has the highest child care costs? According to EPI, the average annual cost of childcare for an infant in D.C is $22,63, which is about $1,800 per month!
Massachusetts is the second most expensive state for childcare with an average annual cost of $17,062, which is about $1,400 per month! According to EPI, the cost of childcare for one child would take up 19.5% of a typical families income in Massachusetts.
My favorite fact from EPI is that childcare is more expensive than public college in 33 out of 50 states, plus Washington D.C. These numbers are staggering and quite frankly make me just want to be a dog owner (click here to read “The True Cost of a Furry Friend“).
With all that said, it should be clear that childcare is expensive and it would be wise of you to search for alternatives and ways to budget for it.
Cheap Alternatives
With the cost of childcare being extremely high and unaffordable for most, it’s worth your time to seek out potential alternatives.
Remote Work
Every day more and more people are being afforded the opportunity to work from home. The power of the internet has made this possible and is allowing businesses to save big time on office space overhead. Not to mention your daily commute is eliminated and you can now keep an eye on your child.
Devise a plan on how it would work, then muster up some courage and ask your boss if you would be able to work from home. They may say yes or they may say no, big whoop! They may work with you and allow you to work from home three days a week. Even that would cut down on childcare costs.
If you are an important member of the team and they say no you can’t work from home, then you could threaten to leave and see if that changes their mind. ***Warning: don’t use this method if you are not comfortable losing your job. Click here for Why You Need an Emergency Fund***
If you and your significant other are both not able to work from home then it may be time to explore some other options. Figure out how much annual childcare costs in your area then compare that to your earnings. You may find that your income is just barely covering that expense. In that case it may be worth leaving your job to raise your child instead of paying someone else to do that.
Flex Your Network
Having your family or friends take care of your child can be a great way to reduce your childcare expenses. If you are lucky enough to have strong family relationship then you’d be amazed how much your Mom or Dad would love watching the kido. Just remember that these people are your friends and family, don’t abuse their willingness to help you.
Outside help
If your family and friends are not an option then you can look for some outside help. In the summer, try hiring a teacher that is on summer vacation. The benefit is that they will likely have a lot of fun activities and lessons already planned for their classroom so you’re child will benefit from this.
You can also hire a local teen in need of work. They’ll be able to assist you throughout the summer and after school hours in other seasons. If your not comfortable having a teen watching your child you can hire a full or part time nanny.
These are just three childcare alternatives to daycare that can save you and immense amount of money. Now it’s time to take a look at ways to budget for childcare.
Childcare Budget Tips
Dependent Care FSA
The dependent care FSA account is a tool that allows you to contribute pretax dollars towards qualified dependent care expenses. The program claims that this account will save you on average 30% on childcare costs. Not to mention this will reduce what you pay in taxes at the end of the year.
The account funds can be used for children under the age of 13 for the following expenses:
- daycare / preschool
- nanny / babysitter expenses
- summer camps
- before and after school care
This account can also be used for care expenses for someone who is incapable of caring for themself and lives in your home.
How to Create an Account:
Go to fsafeds.com and you will be able to begin enrollment. Once enrolled you will have to decide how much of your paycheck you want to contribute.
A married couple filing separate tax returns can contribute up to $2,500 per year. If you file a joint tax return you can contribute up to $5,000 per year.
It’s important to note that the funds you place into this account must be used by the end of the year or else that money is forfeited. With the current cost of childcare you shouldn’t have any issues spending this money, but you can’t say I didn’t warn you đŸ™‚ .
For more information regarding dependent care FSA accounts click here.
Child Tax Credit
If your child is under the age of 17 and you bring in less than $200,000 per year or $400,000 per year jointly then you qualify for the child tax credit (CTC).
With the CTC you can reduce your taxes by up to $2,000 per dependent. However the actual amount per dependent is determined by your personal income. If you have children, make sure that you are taking advantage of this tax credit.
Final Thoughts
The truth is, kids are expensive and the cost of childcare is an expense that many don’t plan for. If you are thinking about having a child or already have one, be sure to do your research on how you can reduce this cost. There are more resources out there that will help you save, you may just have to do some digging.
I really hope you enjoyed this article and learned something useful, If you have any questions hit us up in the comment section, if you have any tips/advice that will help reduce childcare costs please share those as well đŸ™‚
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