How to Plan for (and Save on) Childcare Costs


If you’ve got kiddos, you don’t need me to tell you: childcare costs can seriously add up. And quick.

I know you want the best for your children, and that can make it even harder to manage the expenses associated with raising kids. Sometimes the best is awfully expensive.

That’s especially true when it comes to the biggest childcare costs, like daycare. Depending on where you live and what your options are, sometimes it’s even cheaper to become a stay-at-home parent than to continue working to pay for childcare.

But many parents want to continue working — and that’s absolutely fine if you fall into this camp. You just need to figure out how to manage the cost of childcare so you can achieve the balance you want in your life.

If you know your family will need some form of childcare in the next year or two, the time to start planning for it is now.

Here are five ways to get out in front of that need — and even save money while you’re at it.

1. Take Advantage of Company and State Benefits When You Can

All states require employers to provide 12 weeks of unpaid parental leave when your child is born. Only California, New Jersey, Rhode Island, and New York currently offer paid family leave.

Connecticut, D.C., Hawaii, Maine, Minnesota, Oregon, Vermont, Washington and Wisconsin all offer expanded versions of the required 12 weeks unpaid leave, too. Be sure to check up on the specific benefits offered by your state to see what you’ll be able to use.

The United States is a little infamous for its poor benefits offered to new parents. There are a lot  of caveats to know about before you can take advantage of unpaid leave.

To qualify, you must:

  • Work for a company with 21 or more employees
  • Worked at least half-time for a year, and have been with the company for at least a year

You also have to take your parental leave within a year of the birth (or adoption) of your child, and you need to request it first.

This is just what is required by law. Depending on the company you work for, you may receive benefits that include more time off, paid leave, or other support.

All this being said, use what you can for as long as you can. While you’re at home with your child, you can save on childcare costs by providing that care yourself.

Talk to your HR department or manager now to find out what you’re entitled to — and if you need to apply for or request those benefits before you take them.

2. Do Your Research and Ask Childcare Providers About Discounts

Planning to head back to work? Research childcare providers and options now. Compare reviews from other parents and consider prices and features each offers.

As part of your research, reach out to each provider and ask if they offer any discounts. Some could provide price breaks to parents who belong to the military. Others may offer a discounted price if you place more than one child with them.

Of course, the price isn’t everything when it comes to a caretaker. Look for discounts where you can — but understand that the best option for your family might not be the absolute cheapest.

This is where planning ahead can come in handy. Once you understand the monthly cost of childcare, create a budget that makes room for that expense now — and start using that budget today.

Because the expense for childcare will be in this budget but you’re not paying it quite yet, that creates a savings opportunity for you. Put that money into a cash savings account that you can use for additional childcare expenses down the road.

3. Look into Options Beyond Full-Time Childcare

Enrolling in daycare full-time isn’t the only choice you have. If you find it’s prohibitively expensive, consider the alternatives.

You might want to work — but could you cut back on hours or take a different position that allows for flexible work time?

You also don’t need to hire an entire daycare center to care for your children. Consider hiring a nanny or au-pair. Depending on where you live, this could be a better value for you and your family than sending your kids to a childcare center.

Grandparents are also the standard go-tos for babysitting and childcare help, so I’m sure you’ve considered that option. But have you considered aunts, uncles, adult cousins and siblings?

And what about other parents who may stay at home and could provide care to your kiddo for a smaller fee than what a professional nanny would charge? You may also be able to join a parenting group that shares in childcare responsibilities.

Take this as an example: A neighborhood mom may watch your kids during the week while you’re at work. You could watch her youngest on some weeknights in exchange when she needs to runs her oldest to extracurriculars after school.

It takes a village to raise a child, right? Don’t hesitate to call on your community to come up with creative options for childcare that could end up costing everyone less.

Ultimately, there’s no one right answer. Just focus on what works best for your family.

4. Take Advantage of Tax Breaks

If your employer offers a dependent care flexible spending account (FSA), don’t think twice about using it. This account allows you to use pre-tax dollars from your paycheck to pay for certain childcare-related costs.

Your employer determines how much you can contribute, but the IRS allows up to $2,500 per year if you’re married but file your tax returns separately. You can contribute up to $5,000 if you’re single or married filing jointly.  

Another option is the Child and Dependent Care Credit. If you paid for childcare expenses for a qualifying child to enable you to work or actively look for work, you can get this credit when you file your tax return.

The credit is calculated based on a percentage of your costs, and the total expenses you use to calculate the credit can’t exceed $3,000 for one child or $6,000 for two or more children. (You can’t get this credit if you’re married but file your taxes separately.)

Be careful how many tax advantages you try to take, though. In this case, you can’t use both these benefits for the same childcare expenses. It might help to consult a tax professional to determine the best tax saving strategies for your family.

5. Save in Advance

One of the savings hacks for childcare costs we used in our own family was to start funding daycare as soon as we found out we were pregnant with our second child.

We opened a savings account earmarked for daycare costs and starting contributing immediately. We were able to save up almost a year’s worth of daycare costs before we ever needed to use those funds, which was a huge help.

Sometimes, it just takes a little planning ahead to make it much easier to manage childcare costs.

If you feel like you don’t have enough cash now to set aside for later, it might just take a little shifting of priorities. Take a look at your monthly expenses and find areas where you can cut back a little to focus on this important savings goal.

It might not be easy. But I bet together, we can make it possible.

As a parent, I get how important it is to you to put your child’s well-being ahead of everything else. I don’t think the answer is just to find a cheap daycare and choose a childcare provider based off price alone.

That being said, you need to balance that with your own financial reality. Choosing the most expensive, exclusive childcare option is just as unrealistic.

If you take the time to research and plan well in advance, it’ll become easier to choose the right option for you — and financially prepare to handle the added expense.

Mary Beth Storjohann, CFP® is an author, speaker, and financial coach who takes a fun, no-nonsense approach in working with individuals and couples across the country, helping them make smart choices with their money.

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