Guide to affordable child care when re-entering the workforce
Point of Interest
Finding childcare after re-entering the workplace can seem hard to manage financially, but it ultimately means you choose what’s best for your family.
Many new parents are concerned about child care expenses when going back to work after having a new baby.
Leaving your baby for the first time can be difficult, but finding a loving, qualified provider can help ease your anxiety. Unfortunately, the best child care providers often have long waitlists and come with a hefty price tag. In circumstances like the coronavirus crisis, finding child care is an even more complex topic. With states encouraging their residents to stay home, the need for child care flourishes for parents who must work from home or parents whose jobs don’t allow that flexibility.
The stress of having to compromise on quality of care, as well as the burden of figuring out how to afford it, adds to the anxiety parents face every time they kiss their babies goodbye and head off to work. In fact, the lack of affordable, quality child care forces 13% of mothers with children ages 5 and under to leave their jobs to care for their children themselves.
Finding the right childcare can be challenging, but understanding the real costs of quality care, as well as learning tips for how to leverage your savings and afford the best care for your new baby, will help you go back to work with more confidence and less financial stress.
Challenges of childcare
When choosing the right provider for your family, there are a few important issues to consider: the cost of care, the quality of care, the type of care you want and the availability of that care.
In a 2016 poll among U.S. parents, the most common challenge stated in finding childcare was cost (27%). On average, childcare costs about $250 per week, or $13,000 a year. Infant care costs more than college in 33 states, without the benefit of saving 18 years for it.
Determining what type of childcare you want
Choosing what type of child care best fits your family at least partly depends on your work schedule. Do you work part time, nights, or from home? Every parent has different needs and thankfully there are child care options to accommodate them. Working from home and finding child care may seem counterintuitive to some, but just like all members of the workforce, remote workers have professional requirements or goals that they plan to meet. According to the Bureau of Labor Statistics, in 2017, 23% of US workers did some amount of their work from home.
Attending virtual meetings and achieving the requirements of your job is difficult if you have to also watch over your children at the same time. Just like you can’t always predict how your child will behave, you don’t know what the workday will hold. That’s why juggling both doesn’t have to be a reality.
There are many childcare options to choose from, from hiring a nanny to finding a preschool. Each option provides a different level of care and comes with its own price tag. Consider the pros and cons of each type of care to help you find the best match for your family and your finances.
A nanny offers full-time or part-time care for your child in your home. Some nannies live in your home with you and others do not. What makes a nanny a nice choice is that they can better meet your scheduling needs and are available to work long, odd hours. Plus, most nannies also offer additional household services, such as light housekeeping, running errands and driving children to their daily activities. A nanny costs an average of $19 an hour, but you will also need to factor in the cost of payroll taxes, since a nanny is considered an employee.
Nannies often do not have the training that day care providers have, although you can find some who are certified in CPR and have taken child development classes. They also tend to focus less on educational activities and social development than a day care center would. A nanny can give your child more one-on-one attention, however, creating a stronger caregiver attachment.
When hiring a nanny, look for someone who is patient with children and can be depended on. Other good factors to consider are education and experience. Nannies are not regulated, but you do want to see evidence that the nanny takes the role of child care provider very seriously.
Babysitters can be anybody, but are most often a teenager or an elderly adult. They are not regulated or licensed and are typically flexible in their hours. Babysitters usually do not provide full-time care and are most often used for evenings, weekends and last-minute childcare needs. The average cost of a babysitter is $16.75 for one child and $19.26 for two kids, but this varies by location, age and experience. Plus, it is worth noting pay is often negotiable with a babysitter, as it is a less formal arrangement.
Like a nanny, babysitters come with less training and don’t emphasize educational activities as much as a day care center would. However, a babysitter can give your child exceptional one-on-one attention, even more so than a nanny, because they usually spend the majority of their time playing with the children, whereas a nanny often has other household duties as well.
When choosing a babysitter, look for one who is energetic and playful. A sense of responsibility and accountability are also important. A babysitter should be able to perform light housekeeping duties related to a child’s care, such as washing dishes after feeding the child dinner. Because babysitters are most often teenagers, it is important to look for someone who is reliable and shows up when expected.
An au pair is a young adult from another country that provides care in exchange for the opportunity to live with an American family. They are very similar to nannies, in that they live in the home with the family and are very flexible with their hours. One of the biggest benefits to hiring an au pair is cultural exposure, as your au pair can teach your child about his or her own culture.
An au pair generally works about 45 hours a week, with an average cost of $18,500 a year. When you consider a nanny, this is often a cheaper alternative for the same type and quality of care. When choosing an au pair, consider the person’s personality above experience. Child care skills can be learned on the job, however this person will be living with you, so you want to make sure he or she is a good fit for your family.
Day care is a common choice for parents because it offers full-time or part-time care during normal business hours. Most day cares accept children from six weeks old to around ten years old, or whenever the child is old enough to legally stay home alone.
There are two types of day cares: in-home family day cares and day care centers. An in-home day care is childcare offered in the provider’s home. The average cost for in-home day care is around $159 a week, or $7,627 a year.
Day care centers often resemble a preschool setting, and cost around $248 a week for an infant – or about $11,896 a year.
There are a few things to consider when choosing between an in-home family day care and a day care center. Day care centers tend to be more structured, with a focus on education and social development, although some in-home family day cares can also have a similar structure and focus, depending on the provider. In-home family day care providers, however, can give your child more individualized attention than a day care center can, simply because there are often less children.
There are several things to consider when choosing a day care. Once you check off the basics, such as safety, environment and quality of care, it is important to get a feel for the culture. Does it feel warm and welcoming to you? Are the children happily engaged? Do the providers truly seem to enjoy interacting with the children? Use questions like these to guide your research as you explore day care options near you.
Preschool is generally for three to four-year-olds. Hours vary; some provide care for just a couple of days a week and some provide care for the full week. You can find half-day and full-day programs. Preschool settings are highly structured with a focus on education and socialization.
Early childhood education programs
Early childhood programs promote school readiness of children from birth to five years old. They are generally for lower-income families and you can find them located within childcare centers, public school settings and sometimes at in-home day care settings. These programs are free to those who are eligible.
On-campus after-school care
On-campus after-school care provides child care for elementary students, grades Kindergarten through sixth. The focus of these programs is to fill the child care gap between school hours and normal business hours. It is generally provided by the school, or another nonprofit and costs around $25 to $75 a week. They offer a nice balance between the structured classroom setting and the casualness of an in-home family daycare. This is because most after-school providers understand that a child needs room to unwind after a long day in school, while still instilling good habits, such as setting aside time for homework.
The majority of families use childcare centers because they are the most widely available choice and the quality of care is pretty good for what you pay. In a 2016 poll amongst parents, day care centers rated second in quality of care, just behind relative care. Because of this, day care centers fill up very quickly.
Day care centers can typically only care for Three to four infants and three to six toddlers for every trained adult. This limits how many new babies centers can take on. The waitlists are long and move slowly, as children need to age out before space becomes available.
If you are pregnant or trying to get pregnant, you need to start searching for day care now. The faster you get on a waitlist, the better chances you have of landing childcare.
It’s also good to note a lot of centers require a holding fee or a deposit. It may or may not be refundable, but some places may apply it to the first month of care. The fee will vary, costing anywhere from $100 up to half the cost of filling the spot.
Location of childcare
Another obstacle to overcome when choosing child care is the location of that care. Finding child care that’s located in close proximity to your home or work is ideal, especially in cases where you may need to get there quickly, like when a child becomes sick.
You may also want to consider the overall setting of where your child receives their care. For example, a day care located in a residential setting versus an urban setting can provide different types of benefits and opportunities, depending on what’s important to you and your family.
Costs of child care
Child care puts a financial strain on a lot of young families. In fact, 31% of parents report childcare has posed a financial burden and four in 10 parents say child care is not affordable.
The U.S. government defines “affordable” child care as consuming no more than 7% of a family’s income. Yet, the average family spends 10% of their income on child care, with nearly half of all American families spending 15% or more.
Lower income families spend a much higher percentage of their income on childcare. Young adults just starting their families often fall into this category, because young adults are just starting out in their careers as well, so they are not making as much as their older counterparts. These young parents are often paying off college debt and buying houses when they start their families too, so money gets tight.
Infants cost more than older children because of the higher level of care required. Understandably, the more children you have in care, the higher the cost becomes. Although, some providers will offer a sliding fee or a discount for additional children.
A big challenge many parents find themselves facing is minimums. For example, parents often have to pay a set price whether their child is there or not. If a child is home sick or not in care that day, parents still pay.
The cost of child care continuously goes up, too, adding to the problem. Two-thirds of parents say they are spending more currently than they did the previous year. If fact, the cost of child care has consistently increased almost every year since 2014.
This chart depicts the average weekly cost year over year of child care at a day care center:
|Year||Average Cost of Childcare|
Child care costs by state
Of course, child care costs vary by state. Some states cost significantly more than others. Child care costs $5,436 a year in the least expensive states and goes all the way up to $24,243 a year in the most expensive states.
Wondering how much you should set aside for child care? Take a look at a few of the average child care costs in select states across the U.S.:
- Michigan: $10,861/year or $209/week
- Minnesota: $16,087/year or $309/week
- Mississippi: $5,436/year or $105/week
- New Jersey: $12,988/ year or $250/week
- South Dakota: $6,511/year or $125/week
- Washington: $14,554/year or $280/week
- Washington, D.C.: $24,243/year or $466/week
How to pay for child care
There are many ways to cover child care expenses, such as saving accounts, tax credits, flexible spending accounts and grants or subsidies. Learn more to discover which options might be right for you.
Start saving now
When anticipating childcare costs, the best thing to do is to start putting money aside now. The sooner you get started, the more financially prepared you’ll be when it’s time to head back to work. Here are a few tips to get you started:
- Pay off your credit cards and other unsecured loans. This will give you more money to tuck away.
- Set up your checking account to automatically transfer funds into your savings account each month. Some employers can directly deduct a predetermined amount from your paycheck and deposit it into your savings account as well.
- Set aside any unexpected income. This might include gifts, overtime pay and reimbursements.
- Sell what you aren’t using and tuck that money away.
- Stop auto renewals for subscriptions and instead set up an automatic transfer to your savings account.
- Check into new plans or rates for your cell phone and other services, especially if you’ve been on the same plan for awhile.
- Sign up for an online savings account. These accounts offer higher interest rates and are easy to use.
Becky Olson, a personal banker at Security State Bank, suggests, “If you get taxes back, put that into a savings account and pull from that for your daycare bill. Then it’s not all coming out of your pocket.”
Create a budget and stick to it
When learning to save, creating and following a budget is a must. When you know exactly where your money is going, it also empowers you to make better choices for your family.
Whether you’re newly pregnant or brand new parents, follow these steps to get started creating a family budget:
- Add up your income. Be sure to include all regular income sources, not just your salary. This might include income from a side hustle, reimbursements and overtime. Only count the consistent income, and earmark anything else as unexpected income.
- Calculate your expenses. Be sure to use your actual expenses, not what you anticipate them to be. Your budget needs to be realistic or it won’t work for you. It often helps to track your expenses for a month or two before creating a budget.
- Set goals. Once you know your income, expenses and your bottom line, you can create savings and debt-reduction goals.
- Create a plan. Figure out what expenses you can lower or cut out entirely and then put that extra money into savings or use to pay down your debt. Also, brainstorm additional ways you may be able to earn extra income.
- Track your progress. It’s important to monitor your spending and track your progress toward your goals. Write down every expense during the month and make adjustments to your plan as needed.
- Keep it realistic. Everyone has to have fun once in a while! Be sure your budget offers opportunities to live a little, and to celebrate your progress.
Grants, subsidies and programs
Because child care is so expensive, and because making it easier for parents to return to work boosts the nation’s economy, there are several programs and services available to help alleviate some of the financial strain.
Government subsidies provide assistance for low income families, usually in the form of a sliding fee scale. This means you pay a portion of your bill, depending on your income, and the child care subsidy covers the rest. To apply, contact your county social services, your local community action agency or your local Child care Resource and Referral agency.
Other subsidy options
Some child care centers also offer a sliding fee scale or a scholarship for low-income families who cannot afford the regular rates. When investigating child care centers, be sure to ask about available subsidies.
Many larger companies also offer a child care subsidy or have an established network of child care providers that they endorse. Employees who use these providers receive a discount on their childcare.
Don’t be afraid to check with your human resources department to see if your company offers a subsidy or discount. “Your employer has a vested interest in accommodating you for everything that you bring to the table,” advises Frankie Fegurgur, COO for United Educators Financial Association. “Even if they don’t currently have a program, you could be the one to help them through the process.”
Local nonprofits may also offer child care scholarships to families based on need. Contact your local Child care Resource and Referral agency to find out more.
Dependent Care Flexible Spending Accounts
A Dependent Care Flexible Spending Account (DC FSA) is sponsored through your employer. It uses pretax dollars to pay for childcare expenses and can be a good option for families.
If you have a Dependent Care FSA, you can contribute part of your paycheck to your account before employers take taxes out, making these contributions tax free and lowering your taxable income. Then, you submit a claim to receive reimbursements from your FSA account for the out-of-pocket expenses you incurred for childcare that month. Although the claims process can be cumbersome, it’s a worthwhile process that offers savings on overall childcare costs.
Keep in mind there are limits on how much you can contribute annually to your Dependent Care FSA account. Married couples filing jointly can contribute up to $5,000 combined and single parents can contribute up to $2,500.
The biggest thing to keep in mind when considering an DC FSA is that your employer owns it. If you quit your job before using all of the money in your account, your employer gets to keep that money. If the year ends and you haven’t spent all of the money in your account, you employer gets to keep what is left.
With that said, it’s hard to estimate how much to contribute to your account and you don’t get to change it once you’ve set the amount. Child care expenses can often vary, depending on holidays, vacations and illnesses, so it’s hard to know upfront exactly how many days your child will need care and what your expenses will be. The best approach is to plan ahead and make a conservative estimate on how much to contribute each year.
It’s also worth noting that you may not be able to take advantage of both a Dependent Care FSA and the Child and Dependent Care Tax Credit. There are some restrictions on this. If you’ve maxed the $5,000 cap for your Dependent Care FSA and your childcare expenses hit the maximum of $6,000 for the childcare tax credit, you may be able to use both. The Child and Dependent Care Tax Credit would only apply to the extra $1,000 you had in childcare expenses that was not reimbursable through your DC FSA.
It’s best to discuss whether or not a Dependent Care FSA is right for your family with your human resources manager or a financial advisor before deciding.
The IRS offers a variety of tax breaks for working parents who need to pay for child care.
This tax credit allows you to itemize up to $3,000 in child care expenses per child, with a maximum of $6,000. Again, you cannot use both the Dependent Care FSA and the Child and Dependent Care Credit unless you’ve maxed out your DC FSA and still have eligible expenses under the Child and Dependent Care Credit.
You become eligible for the Child Tax Credit as soon as your baby is born. The maximum amount of the credit is $2,000 for each dependent child that qualifies. You are eligible for this credit every year until your child turns 18.
This credit is available to lower income earners. This credit can be just a few hundred dollars or up to several thousand, depending on how many children you have and what your filing status is.
You are eligible for a tax credit if you hire a nanny as well. This deduction is up to 35% of what it cost to hire your nanny, with a $3,000 cap for one child or a $6,000 cap if you have two or more children.
The federal government also offers child care subsidies to its military families. Each military branch has its own eligibility requirements, so contact ChildCare Aware to learn more.
Financial advice if you can’t afford childcare
If you cannot afford child care, you are not alone. Seventy percent of families with young children are paying child care rates that are higher than what the government deems affordable. Even with tax credits and subsidies, some families still find quality, affordable child care just out of reach.
To make ends meet, many families have gotten creative with how they handle their child care situation.
Part-time jobs and side hustles
Side hustles are becoming very common. In a recent survey, 24% of respondents admitted to taking an extra job to pay for child care costs associated with their full-time employment. Side hustles can include anything from running an Airbnb and doing freelance work to moonlighting as a waitress.
There are many pros and cons to taking on a side hustle, but the biggest concern is that you may spend even more time away from your child. Even if you find something that allows you to work from home, you will be pulled away from your child to get your work done. On the plus side, side hustles expose you to new skills and can ease some of your financial burdens.
Relying on relatives for care
Twenty-four percent of parents who cannot afford child care turn to family members. The nice thing about using a relative for child care is that your child is already familiar with the caregiver and the environment. Using a relative is cost effective and your child will likely get sick less often when not exposed to other kids in a day care setting. However, it can be tricky to navigate disagreements on how to care for your baby or tensions around payment when the care is being provided by a loved one.
The numbers of searches on Care.com for nanny shares increased by 45% in 2018. A nanny share is when two or more families share one nanny, including the cost of the nanny. The benefits of this arrangement include high-quality, more attentive care at lower prices. However, nanny shares require an enormous amount of flexibility and communication between families, as they have to work together on scheduling and day-to-day operations.
To find a nanny share opportunity, Frankie Fegurgur, a financial planner who often helps moms afford the return to work, suggests looking at “preschool announcement boards, college boards and social media groups and blogs.”
Job sharing is when two people each work part time to fill one full-time position. This helps with child care if you find yourself in a situation where only part-time child care is available. Job sharing works well for parents because they can cover for each other when family emergencies arise. However, job sharing can be challenging, as well, because you share your career, income and personal life with another person.
Working from home has been on the rise over the past decade, making it a lucrative option for parents with young children. Many employers offer full and part-time remote work, along with the option to work from home when children are ill.
A lot of women are adopting the role of “mompreneur” as well, starting their own online businesses, and offering a variety of services, from personal coaching to virtual assistant work. Working from home offers incredible flexibility and often child care is not needed. However, it is very hard to balance work life and home life when the two merge into one.
D’Anne Johnson, the Head Start Director at a community action agency, says, “Be creative with your work choices — if you aren’t super passionate about your work, look for options for employment that allow for some flexibility. Consider opening your own daycare. Communities [in our area] are struggling to find enough providers.”
To save money on childcare, many families form childcare co-ops. This is where a group of families share the responsibility of providing childcare. Each family takes a turn providing the care and all care is provided free of charge. Parents love the arrangement because it is flexible and it allows them to get to know the other families. However, it can be easy to put in more hours than you get out of the co-op, and some kids require a higher level of care than others.
Companies that provide on-site childcare or credits
There are some larger companies that do provide on-site child care and/or child care subsidies. These big businesses understand the pressures parents face when they return to the workforce. Providing on-site day care and/or subsidies improves employee morale and reduces absenteeism.
- Abbott: On-site day care
- Aflac: Off-site subsidized child care
- Allstate: On-site day care
- Atlantic Health: On-site day care
- Bank of America: Child care reimbursement of up to $240 a month
- Boeing: On-site day care
- Bright Horizons: Discounted on-site child care
- Deloitte: Offers child care reimbursements
- Disney: Partnered with YMCA to offer on-site daycare; offers a stipend directly to off-site child care providers
- Cisco Systems: Offers discount programs and priority access to partner childcares in the U.S. along with backup care
- Facebook: Offers a credit towards child care
- Fannie Mae: On-site day care
- Google: On-site day care
- Goldman Sachs Group: On-site day care
- Home Depot: Offers high-quality backup child care
- IBM: On-site day care
- Johnson and Johnson: Offers on-site day care and employee discounts for child care
- Men’s Wearhouse: Offers subsidized on-site day care
- Merck: On-site day care
- Nike: On-site day care
- Proctor and Gamble: On-site day care
- Prudent Financial: On-site day care
- Publix Super Markets, Inc.: Offers on-site subsidized child care
- SAS: On-site subsidized preschool
- Time Warner: On-site day care
- Twenty-First Century Fox: On-site day care
- Unilever: Offers access to priority slots at 36 child care centers and subsidized backup care available 50 days per year
- USAA: Offers on-site child development centers
- Valero Energy: On-site day care
- Yahoo: On-site day care
The bottom line
During such a stressful time of a young parent’s life, it’s easy to lose sight of what really matters.
Maureen Hams, the community services director of a community action agency that also houses the ChildCare Aware program, shares, “Child care can be seen as such a burden, but it can also be seen as an investment in your child and your future. Making the childcare payment is not always easy and can be a challenge for many parents and guardians. But think about it as a short-term investment in your child and your family. Quality child care keeps children safe and healthy and helps children develop the skills they will need for success.”
If you desire to go back to work, figuring out how to pay for childcare might seem overwhelming. But with a little creativity and a lot of financial planning, it is possible.