Think childcare expenses are out of your reach? Think again.
Regardless of childcare being the largest annual household expense, to the tune of around $ 18,000 per year (as per a Care.com report), for families having young children, you can actually manage such expenses pretty effectively once you start exploring your options.
A little research and creativity can help you uncover some excellent ways of saving money and locate reliable people who can take good care of your kids.
Let’s go through 8 useful ways in which you can cut down your childcare expenses, without compromising on the quality or safety of care your child receives.
Opt for in-home daycare
This type of daycare facility is far more affordable compared to others. On average, opting for in-home daycare can save you anywhere in the vicinity of $ 40 – $ 50 per week. However, selecting the right in-home daycare can be a challenging task, as we’ve all heard horror stories about such services in the media.
You can begin your search by asking for recommendations from your friends and family who might suggest some good options. You can always save more by asking for a discount, especially if you have more than one kid that needs to be looked after. Also ask if you can pay on a per day basis, rather than quarterly or monthly, as it may allow you to take help of friends and family close by who may readily pitch in on some days. You can even cut down the extra daycare charges by taking some strategic steps, for instance, packing lunch for your children rather than paying for the inclusive meal.
Talk to your HR department about any employer-sponsored daycare discounts or options
Companies have started recognizing the kind of challenges working parents face with regard to their childcare needs. Hence, they are creating all sorts of benefits to help in any way they can. In fact, some organizations provide childcare reimbursements to working parents. Hence, talk to the HR representative of your organization and find out if you can avail any such employer-sponsored daycare discounts or options.
Reassess your budgeting needs
There’s no way you can handle the added childcare expenses unless you take a good look at your current budget and make some adjustments to it. This task must begin by making an accurate assessment of your child’s present monthly needs. And then figuring out the exact amount your family is earning per month. Find out how much money can you possibly spend on childcare each month.
Once you start penning or noting everything down, you may actually be able to afford much more than you had expected to. Please note that when you’re calculating the nanny expenses, don’t forget to consider the yearly costs like annual raises and year-end bonuses.
Many experts also suggest living on one salary and completely saving the other if there are two earning members in the family. It’s an excellent habit that can be a lifesaver not just during the childcare phase, but throughout life.
Get yourself a Dependent Care FSA (Flex Spending Account)
You, your partner or both may be able to open a Flex Spending Account for Dependent Care via your health care provider. Such accounts can help you effectively manage some out-of-pocket health care expenses, including the childcare expenses, by setting aside a certain portion of your pre-tax income each month.
Contributions made to such Flex Spending Accounts are deducted from your gross income, and hence you don’t pay any income tax on them. You’re allowed to contribute a maximum of $ 5000 per year to such account regardless of whether you’re a single parent or are married and filing jointly. This limit gets reduced to $ 2500 per annum if you’re married and file separately. Please note that you can’t roll over the FSA dollars from one year to the next, hence it’s always better to have an exact estimate of the amount you may require. Else, any leftover would be forfeited at the end of the financial year.
Talk to your employer about the possibility of a flexible work schedule
You can save a lot on childcare if you can work out an arrangement with your employer and work from home. Now, to be practical, it’s almost impossible to have complete 8 productive work hours at home every day, especially when there’s a newborn constantly demanding your attention.
However, you can work around such problem by involving a part-time nanny or a relative who can come over at key times of the day, for instance at play times, bath times, feeding times etc., allowing you to concentrate solely on work, and nothing else.
Explore nanny share options
Nanny share can be an excellent option if you’re keen on one-on-one nanny care but can’t afford the expense. As is evident from its name, nanny sharing allows you to share a nanny with some other family/families, enabling you to cut down on its costs. However, please keep in mind that IRS treats all families availing nanny services as separate employers, and each one of them is required to follow the relevant nanny tax process applicable to their state.
Apply for the dependent or childcare tax credits
In case your employer doesn’t provide the FSA facility, you must ensure that you take full advantage of the dependent or childcare tax credits. This type of credit allows parents to free up as much as $ 3000 towards qualifying childcare expenses for one kid and maximum of $ 6000 for two or more kids. But please remember that you aren’t allowed to max out both the childcare credit as well as the Flex Spending Account simultaneously. For instance, if you’ve deposited $ 4000 into your FSA to meet your yearly childcare expenses, you’ll be able to claim no more than $ 2000 for dependent and childcare credit.
No matter what option/s you use for saving on childcare expenses, always keep in mind that childcare isn’t something that you’d want to scrimp on. Quality of childcare is of utmost importance and you must ensure that your children are looked after by someone who is not just experienced, but dependable and nurturing too.