The Financial Toll of Child Care And How You Can Save

In the United States, the cost of child care is a major financial burden for most families that need to send their kids to daycare at an early age. With two young kids myself, I personally know the financial burden child care can have on a family’s budget. We are very fortunate this cost only takes up about 25% of our monthly income. Many families are not as lucky with it costing up to 40-50% of their monthly budget.

Today let us explore the burden of child care costs on families across the United States and how you can save money on child care.

The Costs of Child Care

I have been paying child care bills for almost five years now and I am still in shock at how much it costs. Currently, we pay a modest $2,400 a month for two kids which is the same amount as our mortgage! This is actually fairly reasonable in the Denver area (More about how location affects child care costs coming up).

But why does child care cost so much? Recently I listened to a podcast episode from The Daily about the costs related to child care. Daycares are responsible for paying for their facilities, qualified teachers, maintenance, food, administration, and the list goes on. With limitations on kids to teacher ratios (understandably), daycares are limited to how many

The Financial Toll of Child Care

I already mentioned what my wife and I spend on child care each month. For us, this has hurt our retirement contributions. Over the years we have not been able to contribute as much as we would like to which has set us back in the long run. With one kid about to head to kindergarten next year, we should be able to start recovering from this setback (Colorado has free all-day kindergarten).

There are so many families out there who are not as fortunate as my wife and I have been. According to a survey conducted by The Penny Hoarder, 84% of parents feel overwhelmed by the cost of child care.

How to Save On Child Care

There are so many ways to save money on child care each month and year. My wife and I take advantage of a few of these to help us out as well.

Flexible Spending Accounts (FSA): If you are able to sign up for a flexible spending account through your work benefits, this can be a good place to save money. Why? Because your FSA contribution money comes out of your paycheck tax-free. My wife and I max our dependent care contributions out at $5,000 a year. This will save us about $1,300 a year.
Location, Location, Location: The location of your daycare within the town/city you live in can make a difference. For us, in Denver, it makes a huge difference. My wife and I are still taking our kids to a daycare in a part of town we no longer live in. This part of town is a very low-income part of town so the costs of daycare are a lot lower compared to where we now currently live. The difference is not a little amount either, we are saving over $1,000 a month! Wild! You might be saying, what about the quality? That is a valid question. Sure, the facilities are not as nice but we feel like everything else is better at the cheaper daycare. It has an amazing food program, great staff, and teachers, a state-certified pre-school, and is dual language. You really cannot beat the value. Moral of the story. Do not be afraid to look for cheaper options in child care. They might be just as good or even better than the more expensive options.
Child and Dependent Care Tax Credit: While not as valuable as an FSA but the child and dependent care tax credit is something you need to take advantage of, especially if you cannot contribute to a dependent care account.
Family or Friends: If you have family or friends in the area that are looking to earn some extra money, this might be an opportunity for them to do so. Some stay-at-home parents are looking for the opportunity while they are watching their own kids. This idea could be especially helpful if you do not have a traditional five-day-a-week work schedule.
Nanny Share: I have seen many parents on the Nextdoor app looking for other families to share a nanny throughout the week. Sharing a nanny can really cut back on the costs of child care. Just like above, this idea could be especially helpful if you do not have a traditional five-day-a-week work schedule.
At-Home or Church Daycares: At-home or church daycares can be cheaper than traditional child care providers. Be sure you do your research about these providers, especially for at-home ones. Some people are more comfortable with this option compared to others. You need to decide what you are most comfortable with for yourself and your kid. Growing up, at-home child care providers were the only options we had in my small town of 2,500 people. They were awesome! You can also find many providers through Care.com and SitterCity.com.
Kid Spacing: While a personal choice, my wife and I did take into consideration how close or apart we wanted to have our kids. Having kids closer together helps get you through the daycare system quicker. The quicker you get through this stage of life, the cheaper it will be. On the flip side, having kids really far apart (4-5 years) is another option because you will only have one kid in daycare at a time.
Are you a Teacher?: My wife is a high school teacher so we have worked with our child care provider to take them out in the summers. This means we do not have to pay that bill for 10-weeks of the year which saves us almost $6,000 over the summer. Wow!

As you can see, saving some money on child care takes a lot of creativity but can be really worth it to lessen the financial toll child care can have on your finances.

Last Thoughts

The last thing you need to consider is it worth sending your kids to a daycare or not? My wife and I had several conversations before our second kid came along. We talked about the financial aspect. Was it worth having one of us stay home with the kids so we did not have the daycare cost? Ultimately we decided the difference between the cost of child care and income was great enough to keep sending the kids.

Not all decisions are financial either. We thought talked about the social aspect the kids are getting. Both my wife and I enjoy our careers so we didn’t want to sacrifice those either. As mentioned before, my wife is a teacher so she gets to still have her career and spend summers with our kids. What an awesome arrangement!

What are you doing to save money on child care expenses?

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Wallet Squirrel

Wallet Squirrel is a personal finance blog by best friends Andrew & Adam on how money works, building side-hustles, and the benefits of cleverly investing the profits. Featured on MSN Money, AOL Finance, and more!