How New Parents Can Plan to Afford Childcare

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It is no surprise that kids are expensive, but most parents are not preparing for how great the actual dollar amount becomes throughout the years. The first year of a baby’s life costs about four times what most parents expect, and according to a 2014 report from the U.S. Department of Agriculture, middle-income families will spend nearly a quarter of a million dollars raising a child from birth to age 18.

Typical Childcare Costs

One of the biggest expenses parents endure is child care, especially while kids are young.

The national average annual cost of care ranges from $10,468 for a daycare child care program to $28,905 for a nanny, according to’s new 2017 Cost of Care Survey.

Depending on where you live, monthly child care expenses can be as much or more than a mortgage payment.

Is the cost worth it? Studies have shown that quality child care not only is important for a young child’s health and safety, but it also can help their developmental skills and expose them to new experiences. New parents should take the time to understand and plan for both expected and unexpected child care costs. Planning in advance can go a long way toward helping your family avoid the shock and feel more confident with your child care decisions. Below are five tips for new parents.

Talk About Your Finances

If you and your partner are planning to have children, it is important to discuss your finances before the baby arrives. Have an open and honest conversation about what your ideal child care situation looks like and do research on local childcare options. Think about what is right for your family in terms of your jobs, working hours, your earning potential, living situation, expenses, and values about childcare. Having this discussion will help you make important decisions and understand the budget associated with those decisions.

Research Child Care Options

There are many child care options and the range of costs can be overwhelming and confusing. The options include traditional daycares, in-home daycares, nannies, nanny shares, babysitters, and having you or a family members watch your child. The childcare provider you choose will impact your expenses, so understanding the pros and cons of each and the costs associated will help you figure out what is best for your family.

Evaluate Costs and Benefits

Some childcare options are more expensive than others, but those options may have benefits that are more important to you. A nanny will likely cost your family more, but your child will be watched in your home, will make the mornings less hectic for you, and a nanny may take care of light housework and laundry. She may also cook for your child. If you send your child to daycare, the costs may be lower, but you may have to pack lunch everyday for your child. You should think about whether having to pay more outweighs having to prep a bottle, diaper bag and get you and your kid out the door everyday.

Ask About Employee Benefits

More employers are understanding the importance of childcare benefits and are offering some perks, such as onsite daycare facilities, partially offsetting the cost of back-up child care or providing paid time-off to care for sick dependents. Before you have a baby make a point to sit down with your company’s human resources department and found out all the childcare and dependent benefits available to you. Also ask your company about a health FSA or flexible spending account, which allows you save dollars pre-tax and then spend them in the same year on medical expenses. You do not have to pay federal taxes on the money as long as it’s used for qualified medical expenses.

Know Your Tax Obligations and Breaks

There are childcare tax benefits and other ways to get money back for childcare. If you pay someone to take care of your children while you work, you may qualify for the Child and Dependent Care tax credit. According to the IRS, “You may be able to claim the credit if you pay someone to care for your dependent who is under age 13… to qualify, you must pay these expenses so you can work or look for work.” During tax time, make sure to ask your accountant what you quality for because it may save you a lot of money!

A Word From Verywell

Planning for child care can be complicated and overwhelming, but it’s not impossible to manage these expenses with some time and research. If you do not want to be blindsided by the costs of raising kids, do your research about local childcare options, talk to your human resources department, and consult an accountant or financial planner.

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Article Sources
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  1. U.S. Department of Agriculture. Parents Projected to Spend $245,340 to Raise a Child in 2013, According to USDA Report. Updated August 2014.

  2. Cost of Child Care Aurvey: 2017 Report. Updated July 2018.

  3. Donoghue EA; Council on Early Childhood. Quality Early Education and Child Care From Birth to KindergartenPediatrics. 2017;140(2):e20171488. doi:10.1542/peds.2017-1488