Eight Tips for Reducing Child Care Costs
The following is presented for informational purposes only.
No surprise to parents—child care costs can seriously strain a family’s budgets. Care.com’s annual survey found that weekly rates for a single infant can range from $300 at a family care center to $612 for a nanny. These numbers are up considerably over only a few years ago. 2021 rates for day care centers have risen 87% since 2019. So while rates can vary greatly depending on where you live, even in low-cost areas child care can be a significant expense.
To help you keep costs under control, while also ensuring your child has a safe and nurturing place to go, consider the following child care cost-saving tips.
1. Do the math and compare options
Many new parents do the math and determine how much they’re going to have to spend on child care throughout a year. Sometimes, it’s such a large portion of one parent’s income that it makes more sense for a parent to stop working and stay home.
If both parents want or need to continue working, this could still be a good point to consider leaving your job for something else. Higher pay could good one goal, but even if you can’t find that, you may be able to find a job that has a more flexible work schedule or child-related benefits—both could be just as valuable.
2. Look for daycares and nanny services early on
In some areas, daycare centers can fill up quickly and getting your name on the waitlist as early as possible could be important. But before rushing in, ask other parents for recommendations and compare the services, cost, and location of nearby daycares.
Expanding beyond the well-known centers and looking at in-home daycares could also lead to savings. However, make sure they’re well-reviewed and meet local safety and licensing or registration requirements.
3. Share or trade with other parents
While hiring a nanny to watch a single child likely isn’t as cheap as dropping a single kid off at daycare, if you have several children or can share a nanny with other families you may come out ahead that way.
Additionally, if one parent decides to cut back at work, and you have friends who are also working part-time, you may be able to align schedules and trade babysitting during your off times. You could also complement the arrangement by occasionally hiring a nanny to watch everyone’s children, freeing you up to focus on other responsibilities or take a few hours for yourself.
4. Join or form a cooperative
Rather than a one-for-one exchange or share, with a larger group of local parents, you may be able to arrange a no-cost exchange for babysitting services. Sometimes called babysitting cooperatives (or co-ops), parents can accrue by watching other children and then spend those hours when they request a sitter.
With a decent-sized group of parents participating, there’s a high likelihood that someone will be available when you need assistance. Plus, you don’t need to offer a direct trade for babysitting as you can bank and spend hours within the group. There are even some apps like SittingAround that can help you create, find, and facilitate a co-op.
5. Look into a dependent care flexible spending account
Some companies offer a dependent care flexible spending account (FSA) to employees. Single parents can contribute up to $2,500 a year with pretax money, while married parents who file a joint tax return can contribute up to $5,000. The benefit from your contributions will vary depending on your tax situation, but you can use Boston University’s calculator to estimate your tax savings and see suggested contribution amounts.
After contributing, you can use the money in your FSA to pay for a variety of child care expenses, including daycare, preschool, babysitting, nannies, before- or after-school care and summer day camps (no overnights) for dependent children who are 13 years old or younger.
6. Compare FSA benefits to the dependent care tax credit
If you have one child, you can either claim the tax deduction from contributing to a dependent care FSA or claim the dependent care credit, but not both. If you have two or more children, you may be able to claim FSA deductions and the tax credit.
When you must choose, the best case will depend on your situation—sometimes the tax credit is worth more or less than FSA contributions. However, there’s more to consider than just the total dollar amount. For example, the tax credit may provide a greater overall benefit, but you’ll receive a lump-sum when you file your annual tax return. On the other hand, FSA contributions could lead to slightly higher paychecks throughout the year, which may help ease cash flow crunches.
You may want to research and calculate your potential savings from either option and ask a tax professional for assistance before you open an FSA.
7. Ask about other employer benefits
In addition to a dependent care FSA, some companies may reimburse child care expenses. Others may offer on-site facilities and cover some or all of the costs. Even if you need to pay for on-site child care, you can save time and money by avoiding an extra commute to a different child care center—plus, you might get to say hi throughout the day.
8. Look for subsidies
Some parents may be eligible for subsidized child care through their state, school, or employer, or due to their military service. Eligibility and availability can vary depending on where you live and your income, but check with your state, employer, and other affiliations to see if you can qualify. Whether or not you qualify for a subsidy, look to see if any nonprofit organizations in your area offer low-cost child care options.
Even after you’ve found ways to save, the cost of child care (along with all the other costs associated with raising a child) can strain budgets. If you’re looking for help or want another opinion, a nonprofit credit counseling agency like MMI can help you find ways to save.
Free counseling is available 24/7! Work with one of our NFCC-certified counselors to reduce expenses, tackle debt, and begin saving for important goals.