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20 ways to save money on child care

Rachel Murphy
June 13, 2018

Think you can't afford child care? Think again.

You may believe it's too expensive for your family, but once you explore your child care options, you might be surprised. With a little creativity, planning and investigating, you can uncover many great ways to save money and find reliable people to care for your kids while you are at work.

Here are 20 ways to lower your child care costs:

1. Determine your budget

How much money can you spare for child care? When you actually start crunching numbers, you might be able to afford more than you thought. Knowing your budget will give you a great starting point for evaluating your options.

When you're calculating what you can pay a nanny or sitter, don't forget to factor in additional forms of income such as end-of-year bonuses and annual raises.

Check out Care.com's babysitter rate calculator to figure out the going rate for sitters in your area.

2. Start early

Most families look for care during the summer. Generally, the more affordable, experienced caregivers get grabbed early. Start your search soon and don't wait until the last minute.

3. Sign up for a Dependent Care Account

If your employer offers this type of Flexible Spending Account (FSA), you can set aside up to $5,000 tax-free to pay for child care. You can save around $2,000 depending on your marginal tax rate, says Tom Breedlove, Senior Director of Care.com HomePay.

The FSA covers expenses for day care, preschool and even summer day camps (although not overnight camp) — anything that's needed so you can go to work.

Set aside the amount you truly need because funds in the account at the end of the year will be forfeited. And keep good records, as you must submit reimbursement requests to get the money back. Each spouse can contribute to an FSA account, but total family contributions cannot exceed $5,000.

If you're enrolling for the first time because a baby is on the way, you don't have to wait until open enrollment, says Breedlove. For a "life-changing event," you only have the 30 days after the baby's birth to enroll.

4. Apply your child care tax credit

If your employer doesn't offer a flexible spending account, you can take full advantage of the child care tax credit, says Breedlove. This credit allows you to itemize up to $3,000 in expenses per child per year, up to a $6,000 annual cap per family. Once you've itemized the expenses, you can take a percentage of that and apply the tax credit.

You can use an FSA and a tax credit, but if you do, any FSA money is applied to the tax credit cap first. So if you use $5,000 from an FSA, you can then itemize only $1,000 for the child care tax credit.

This nanny tax calculator will also tell you how much money you can save from these tax breaks.

5. Talk to HR

Companies are starting to recognize the burden that working parents face when it comes to child care – and they're creating benefits to help.

What benefits does your company offer? Some businesses offer child care reimbursements for working parents. Check in with your human resources department so you don't miss out on these money-saving benefits.

Find out the 10 Things to Ask HR for Today.

6. Strategically structure your caregiver’s payroll

There are certain benefits families can offer their caregiver that are considered non-taxable forms of compensation. That means the value of these benefits are not counted toward the part of their pay that has Social Security, Medicare or income taxes withheld. Non-taxable benefits include:

  • Up to $260 per month for public transportation to and from the workplace.
  • Up to $260 per month for parking at the workplace and/or public transportation facility.
  • Cell phone service – as long as the use of a cell phone is a necessary requirement of the job.
  • Health insurance premiums from a state-licensed provider. Families with multiple employees must purchase a health insurance policy through the Small Business Health Options Program (SHOP) to receive the benefit.

7. Find family child care

A family child care center takes place in a caregiver's home and, while the amenities may not be as fancy, the money you save can be significant. Just make sure whatever facility you choose is licensed by the state so you know you're getting the best care possible.

Not sure exactly what "family child care" is? Take a look at our article, "What is Family Child Care?"

8. Use on-site child care

If your company has an on-site day care, it can save your family money, while offering you peace of mind. Generally, on-site day care is more affordable than a day care in your community. And, best of all, your kids are nearby.

9. Host an au pair

Au pairs are foreign nationals — young people from a different country who are looking to come to the country for one year as a part of an au pair program. They work in child care, take classes and experience American life. It's like they're one-part nanny and one-part exchange student.

An au pair lives with a host family, cares for their children and, in return, the hosts provide room, board, and a stipend. They're usually less expensive than a nanny but also have less training. They're typically better for older children than younger.

Learn All About Au Pairs.

10. Shift your schedule

If you can't afford to stay at home full-time, what about part-time? You can find lots of jobs that offer a more flexible schedule, and then you only have to cover child care costs for part of the week.

If part-time isn't an option, what about talking to your employer about a flexible schedule? Can you work only a few days a week, but put in long hours? Can you telecommute all or part of the time?

Talk to your partner about coordinating flexible work schedules so that someone is always available to watch your kids. If each parent can take a different shift, you can reduce the overall need for child care.

11. Share child care

If you have friends who are also looking for child care, get together and form a nanny-share. You hire one nanny to watch both sets of kids and share the cost — including the taxes.

Ask yourself: Is a Nanny Share Right for You?

12. Arrange a "child care share"

If schedules and parenting styles allow, parents can also share child care by swapping days, says Lindsay Heller, also known as The Nanny Doctor. Money doesn't change hands at all — the big investment here is time. If you take all the kids for three days and your neighbor or friend takes two (and then reverse it the next week), you can have reliable, cost-free child care.

13. Hire a teen for after-school child care

Your kids get out of school at 3 p.m., but you don't get home from work until 6. What do you do? When you need is someone to watch your kids for a few short hours, a great cost-effective option can be hiring a teenage babysitter to help out. Teens typically get out of school before younger children and are great for keeping younger kids occupied or prodding slightly older kids to get homework done.

Not sure if a teen will work for you? Check out your 10 Options for After-School Child Care.

14. Combine jobs

Sometimes nannies are willing to take on additional duties that can make this a more affordable option. See if your nanny is willing to and has the skills necessary to also handle some housekeeping, pet care or tutoring duties. Of course, you'll need to pay her more for the extra work, but it will be less than hiring a completely new person. Just make sure her priority is always your kids.

Consider: Is Your Nanny Your Housekeeper?

15. Have kids close together or far apart

Obviously, this is only really relevant to those of us who may be in the family planning stages of parenting. That said, timing can be crucial when it comes to the cost of child care. Children born close together or further apart may help reduce your overall child care costs. There are pros and cons to both. Some day care centers or sitters may offer a reduced rate for the second child if both are enrolled at the same time. On the other hand, waiting a few years in between each child allows you to save, plan, and perhaps just pay for care for the youngest child if the other is old enough to be enrolled in school.

16. Ask family members for help

It really does take a village, doesn't it? If you happen to live nearby family members, like grandparents or aunts and uncles, ask them if they would be willing to care for your children while you're away at work. This could be a part-time or full-time arrangement, depending on the willingness of the family member. Be open, understanding and flexible when asking them about the possibility. You may want to consider offering a small amount of money to the family member for their services. Take into account any transportation and food costs for each child that the family member may expect you to cover.

17. Explore any non-profit options available to you

You may find free or low-cost childcare options at a local church, YMCA, Jewish Community Center, or another non-profit establishment in your community. Oftentimes these facilities offer affordable childcare options to working parents. Non-profit child care facilities are able to receive federal, state, and private grants. The extra funding allows these centers to accommodate those who are unable to afford child care at a for-profit facility. Many local governments also offer free voluntary pre-kindergarten services to children ages 4 and 5, which can help reduce the overall amount you are paying. 

18. Child Care and Development Fund

Each state has a child care assistance program, funded by the federal government. This program is for low-income parents or primary caregiver with children under the age of 13 who need access to child care due to work or school-related responsibilities but cannot afford it. Visit benefits.gov to learn more about this program.

19. Request to work remotely from home

If you currently have a job, consider asking your manager if you could work from home a couple times a week (or more, if necessary). While you will still have daily work responsibilities that require your full attention, working from home could save you money on gas, clothing, and other typical in-office expenses. Depending on the job, you may also be able to stagger your workload in such a way that you only need to send the children part-time instead of paying for full-time. 

20. Find your side hustle

Perhaps you've always dreamed of launching an Etsy shop or you're an ace at selling items online, whatever it is, a second income can help supplement your child care costs. From hobbies to weekend work here and there, any extra money can help cut back on the overall expense. Be creative! 

Above all, remember that child care is not something you want to scrimp on. Everybody's child care situation is different and it's important to remember that being flexible and open to a variety of options will yield the best returns for your family. You should invest in the highest quality you can afford to make sure your children are taken care of by someone who is experienced, nurturing, responsible and dependable.

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