20 ways to save money on child care

April 28, 2020

Think you can't afford child care? Think again. You may believe it's too expensive for your family, but once you explore your options, you might be surprised. 

The first step to take before looking into your child care options is figuring out how much money you can afford to spend. Knowing your budget will give you a great starting point for evaluating your options. And when you actually start crunching numbers, you may find you’re able to afford more than you think. 

Once you know your budget, it’s time to get creative. With a little 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. To get you started, here are 20 ways you may be able to lower your child care costs:

1. Start early

Most families look for care several months in advance — parents who need school-year care start looking in the summer and those who need summer care start looking in spring. Generally, the more affordable, experienced caregivers get grabbed early. Start your search early and don't wait until the last minute.

2. Know your child care options

Depending on your budget, you may want to choose an in-home day care center or a part-time babysitter. Or a nanny share could be the perfect fit for your care needs. Get to know all the types of child care available and how much they cost. 

3. Know the going rate in your area. 

The cost of child care varies widely from one community to the next. Those living in areas with a higher cost of living generally pay more for child care than in lower-priced areas. And you definitely want to make sure you’re not paying too much for where you live. To find out the going rate for full-time care in your community, check out the cost of child care calculator. Or use the babysitter rate calculator to figure out the going rate for sitters in your area.

4. 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 or attend school.

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. Other examples of life-changing events can be a change in child care needs, such as hiring a summer nanny or getting married.

5. Apply your child care tax credit

If your employer doesn't offer an FSA, 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. Most families will see a 20% savings, which means you’ll save up to $600 if you have one child and up to $1,200 if you have two or more children. 

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.

6. 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.

7. 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 $270 per month for public transportation to and from the workplace (the cap in Massachusetts is $140 per month).

  • Up to $270 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 set up an Individual Coverage Health Reimbursement Arrangement (ICHRA), Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or purchase a policy through SHOP (Small Business Health Options Program) to receive this benefit.

8. Find family child care

Family child care (also known as in-home child care) 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.

9. 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 center in your community. And, best of all, your kids are nearby.

10. 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.

11. Shift your work schedule

If you can't afford to stay at home full time, what about part time? Many employers now offer  more flexible schedules, and then you only have to cover child care costs for part of the week.

If part-time work 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 longer hours per day? 

12. Stagger work schedules

Partnered parents may consider coordinating flexible work schedules so that one parent  is always available to watch your kids. If each parent can take a different shift, you can reduce the overall need for child care.

13. 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 the kids from both families and share the cost — including the taxes.

14. Arrange a child care swap

If schedules and parenting styles allow, parents can also share child care by swapping days. 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 them for two (and maybe you reverse it every week), you can both have reliable, cost-free child care.

15. 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 all 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 school-aged kids to get homework done.

16. Have kids close together or far apart

Obviously, this is only really relevant to those 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, and there are pros and cons either way. 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 right when the other is old enough to be enrolled in school.

17. 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.

18. Explore any non-profit options available to you

You may find free or low-cost child care options at a local church, YMCA, community center or another nonprofit establishment in your community. Oftentimes these facilities offer affordable child care options to working parents. Nonprofit 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. 

19. Look into the 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 and primary caregivers with children under the age of 13, or under 19 if incapable of self-care or under court supervision, who need access to child care due to work or, in some states, enrollment in a training or education program but cannot afford it. Visit Benefits.gov to learn more about this program.

20. Request to work remotely from home

If you’re currently employed, 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 pay for part-time care instead of full-time care. 

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.

Tips and stories from parents and caregivers who’ve been there.

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