6 ways to cut child care costs
Parenting is full of surprises. Perhaps one of the biggest is how much child care costs. Depending on where you live and the age of your children, full-time child care can cost $4,000 to $15,000 a year. In many states, it costs less to send a child to college than to day care. Of course, when choosing a child care provider, your children's safety and well-being takes priority over cost. But with these tips, you may be able to save some dollars while making sure your children get the loving care and attention they need.
1. Take advantage of a Flexible Spending Account (FSA). An FSA will not lower child care expenses; however, it can reduce taxes. Married couples filing jointly can set aside up to $5,000 per year in pre-tax income in an FSA. The funds can be used only to pay for dependent care expenses, such as day cares, summer camps and nannies. If your family is in the 35 percent tax bracket, maxing out an FSA can save $1,750 on annual taxes. Be aware, though, that you lose any unspent money at the end of the year.
2. Get your child care tax credit. Not all employers offer flexible spending accounts for child care. If yours does not -- or if you spend more than $5,000 a year on dependent care -- the Child and Dependent Care Tax Credit can save you money when you file taxes. Internal Revenue Service (IRS) rules allow parents with dependent children ages 12 years or younger to receive up to a 35 percent credit on child care costs of $3,000 for one child, or $6,000 for two or more children.
3. Seek financial assistance. The U.S. Department of Health and Human Services' Office of Child Care provides financial assistance to cover child care expenses for low-income families. In addition, most states offer subsidies for parents earning less than 200 percent of the poverty line (approximately $44,100 for a family of four). Some child care centers offer price breaks or scholarships, but you have to ask for these. Another Health and Human Services program, Child Care Aware, connects parents with state child care resource and referral agencies. These experts can help you find information about a child care provider's licensing, complaints or violations. They also can direct you to child care financial assistance programs available in your area.
4. Consider other options. Home-based day cares tend to be more affordable than larger, franchised child care centers. However, they do not always have to meet state licensing requirements. It is up to you to conduct background checks on home providers. Community centers, churches, educational institutions (including universities and public schools) and organizations such as the YMCA often offer lower-cost child care options.
5. Call on "the village." The African proverb, "It takes a village to raise a child," implies that many people -- relatives and neighbors -- have a hand in a child's upbringing. Make a list of trusted family and friends who might watch your child in return for compensation (maybe less than you would pay an actual child care center). Or, if you have an in-demand skill, barter a service (think bookkeeping, cooking, lawn work). Another option: talk to neighbors about forming a child care cooperative where parents take turns watching each other's children.
6. Switch up your work schedule. Talk to your employer about negotiating a different schedule or telecommuting. An earlier start time might allow your child to be home a few more hours in the morning until your partner takes him or her to day care. You may then be able to leave early enough to pick him or her up. This reduces the number of hours your child spends in child care – and that you pay for.
The decision whether to stay at home with children or return to work is a complex one. Some families find that the cost of child care eats up most of one parent's paycheck. Child Care Aware's free online Decision Making Tool can help. The tool features questions and a budgeting program designed to help families make an informed choice about child care needs.
|Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.|