With prices rising across the board, many families may be concerned about the cost of child care. Indeed, some studies have found that the cost of child care is on par with or even higher than the cost of college tuition! How can families budget for child care while still keeping costs under control? Read on for a 7 tips on managing the costs of child care.
Research Babysitting Cooperatives
A babysitting cooperative is a group of parents who trade babysitting services amongst one another, normally without any money changing hands. It’s a great option for parents who have the time and resources to watch multiple kids on occasion. Look for babysitting co-ops in your area by searching social media or asking other local parents. The SittingAround platform online is a great place to start!
Claim Tax Credits
If you’re paying for child care to enable a parent to work, you likely qualify for the child and dependent care credit from the federal government. This tax credit is worth up to $2,000 in 2022, which will be distributed as a reduction in taxes or an addition to your tax refund. Eligibility is based on the child’s age (under 13), and you’ll need to provide identification details for the child care provider.
Adjust Work Schedules
It’s often a complicated choice to balance the opportunities of work with the necessities of child care. The good news is that since the pandemic, workplaces are more flexible than ever in terms of required office hours and work-from-home options. It never hurts to ask your manager about the potential for more flexibility in hours: even an hour or two adjustment per week can reduce child care bills.
Get Serious About Budgeting
Smarter budgeting is a good strategy for any household expense. If you don’t already have a family budget, use this as an opportunity to start one. Budgeting apps like Mint or YNAB (You Need a Budget) are popular, with features to help you design important financial decisions ahead of time and track spending – both of which are essential to planning and paying for child care expenses.
Consider an FSA
A Dependent Care FSA, or Flexible Spending Account, is an IRA benefit which lets families save pre-tax funds to pay for out-of-pocket dependent care costs, including child care. Contributing money to an FSA lowers your taxable income, with a maximum deduction of $5,000 in 2022. Qualified expenses include day care, nannies and babysitters, but be aware that claiming the FSA deduction makes you ineligible to claim the child and dependent care credit – so do some calculations to see which is best for your family.
Check on Employer Benefits
Beyond paid family leave, many workplaces now offer specific benefits for employees with dependent caregiving responsibilities. If you’re not sure what’s available at your place of employment – ask! Some workplaces offer child care subsidies, Flexible Spending Account contributions, and free or discounted babysitting at child care centers near the office.
Small savings can add up big time, if you’re managing your finances carefully. If your child is old enough to be interested in the concept of money, get them involved in the family budgeting. Chat about fun ways to save more money, such as cooking a nice meal together instead of going out for pizza. A few dollars here and there won’t pay for all daycare costs, but it can make enough of a difference to help.