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5 Steps to Create a Child Care Budget

Katie Bugbee
March 7, 2017

The average family spends $18,000 on child care per year. Yet, 42 percent of families don't budget for it. Here are tips to help.


“No Way”

“How is that possible?”

These are some of the G-rated reactions 75 percent of families might have when hearing how much child care was going to cost. In fact, a survey from Care.com showed that only 25 percent of respondents said they were NOT surprised or overwhelmed by the child care price tag.

How much is it? The average American family spends 18 percent of their income on child care.

Now, if you don’t have that extra money regularly coming in (and not many do!), this means a whole new family budget. We talked to Holly Perez, consumer money expert at Intuit and spokesperson for Mint.com, for advice on how families can budget.

And check out our infographic on the Cost of Child Care.

Step 1: Learn How Much Care Will Cost You

Whether you’ve put a deposit in on a day care center, made an offer to your dream nanny or signed with an au pair agency, you should have a sense of how much child care will cost you, monthly. Be sure to also factor a child care tax break (up to $1200 back) and savings using your company’s flexible spending program (up to $2000 on care expenses).

Tip: When you hire a nanny, you also need to pay taxes. Get a sense of a nanny’s salary with taxes applied with our nanny tax calculator.

Step 2: Figure Out Where You Currently Spend Money

Create a list of all the things you spend on -- before kids. And add up how much you’ve spent on them in the past year. (A free service like Mint.com can compile this for you.) This list can be really eye-opening for families to see where they’re spending most.

Step 3: Find Places to Cut

Perez advises that you now go through your discretionary spending (as in the non-essential) and see what can be cut -- or minimized. The most common places people can make room are with coffee runs (make instead of buy), restaurants (limit eating outside the home), gas (start carpooling or taking public transit more), clothes (buy consignment) and groceries (buy in bulk). You might also need to cut back on vacations, gift spending, beauty/spa services, technology upgrades and gym memberships. There may be less expensive options that can still provide an enjoyable lifestyle.

Whatever you do, don’t cut from your “Emergency Fund” savings. Perez reminds that this special pocket of money is critical to your family. Especially now. “A job loss or other unexpected traumatic event can cripple a family’s budget. Prepare for the unexpected and try to set aside money to cover three months of expenses,” she advises. Also try to budget money to set aside for your 401k savings and a college fund for your kids.

Step 4: Track Discretionary Spending

Assuming you have cut and re-allocated your paychecks to afford child care (and if you haven’t, you might need to find a less expensive option), you now need to hit your new numbers. Remember your main culprits. “Many families have no idea how much they spend on dining out, travel, entertainment or clothing,” Perez says. “Budgeting is a matter of knowing what you earn, what you owe and where money is spent.”

Step 5: Allow for Changes Over Time

Yes, your salaries are bound to increase (thank goodness!), but you also might have another child or your first child may have new expenses as he gets older -- especially in terms of activities and interests. This could mean a whole new care strategy for your family.

In fact, in certain cities such as Boston, New York City and Minneapolis, it’s less expensive to have a nanny than it is to have an infant and preschooler in day care (check out our infographic to learn more).

But the soccer, violin and T-ball lessons add up as well. Perez likes to keep “3 B’s” in mind when trying to save money over time:

  1. Borrow: equipment, instruments, uniforms
  2. Bargain shop: consignment stores, deals online, etc.
  3. Budget: factor activities and equipment in to your new annual budget so you don’t get surprised!

Raising kids is expensive -- in fact the USDA says you will spend over $240,000 on each child from birth to 17. But remember, their care is temporary. Once you get all the kids into school, you may feel like you just got a huge pay raise!

Katie Bugbee has written for Babble, Huffington Post, Newsday and Parenting. A busy working mother, she offers families advice on many parenting dilemmas, from appeasing picky eaters to finding the perfect babysitter.

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