Babies and Families

How to Make Child Care More Affordable for Your Family

When considering starting a family it's key to factor in the cost of raising a child into the budget as well as the cost of child care. Tax credits are available, but every household may not qualify.

How to Afford Child Care When Living On a Budget

Many young parents who are already living on a budget simply aren't prepared to face the costs of child care. According to Child Care Aware's 2015 Cost of Care report, the costs of full-time child care in the US can run anywhere from $5,476 to $16,594. Your location, the age of your children, and the type of care you choose for them are all significant factors in determining how much you'll spend.

If you plan on having children, and neither you nor your spouse can afford to take a break from your career to stay at home with your kids until they are old enough to attend school, then it's important to determine what kind of budget you have for childcare and how you intend to make your child care plan work. Here are a few things to consider when calculating the possible costs of your child care expenses.

In addition to the Federal Child Tax Credit, which gives you $1,000 credit for every child in your home (if you fall within a certain income bracket), parents can also take advantage of The Child and Dependent Care Credit, which will reimburse you up to $3,000 for child care for one child under age 13, and up to $6,000 for child care for two or more. You can determine your eligibility for the Child Tax Credit at the IRS' website here and find out more about the Child and Dependent Care Credit here.

Set up a Flexible Spending Account.

Talk to your employer's HR department about setting up a Dependent Care Flexible Spending Account (FSA). These FSAs allow you to set aside up to $5,000 (pre-tax) to spend on a wide variety of child care expenses, from facility-based daycares to sleepaway camps and more. The money is automatically deducted from your paycheck, which makes budgeting for child care just a little bit easier. (Do note that the pre-tax $5K that you deposit into your FSA will count against your Child and Dependent Care Credit.)

Weigh your options carefully.

Private daycares, in-home daycares, nannies, or au pairs? There are a lot of child care options to choose from. A state-licensed daycare facility may seem like the safest bet, but it may also be the most expensive option in your area. A private nanny doesn't trail far behind in terms of cost, but if you have friends with young children of similar ages, why not consider a nanny co-op? Home-based and ministry-based daycare centers tend to be the cheapest, but they aren't always subjected to the same licensing requirements as facility-based daycare centers (it varies by state). If you're shopping for a daycare center, look to your friends and peers for recommendations.

How flexible is your work schedule?

Talk to your boss and HR department about using flex-time or working from home for a day or two per week. Flex-time is especially handy once your children have started school. If you can adjust your work schedule to run from 7-3 instead of the standard 9-5, you won't have to pay someone or depend on anyone to watch your young children until you return home each day. If your children are under 4, and you and your spouse can both work from home for a day or two each week, that's up to four days that you won't have to pay for child care.

Read the fine print, and don't be afraid to haggle a little.

When you're shopping for a child care provider, be sure to carefully review the terms and conditions of any contract that comes your way. Are the centers hours flexible, or will you be slapped with fees if you don't pick-up your children by the assigned time? Will you be charged for sick days or vacation days when you don't need the center's services? (Full-time enrollment sometimes comes with such awfully stringent policies attached.) If you choose to go the nanny or private, home-based daycare route, discuss such situations at length with any potential hire so there's no confusion in the future. Be aware that it is fairly common practice for daycare centers to offer a discount to families enrolling multiple children in the same daycare program, so don't be timid about asking for one. If your brood is bigger than two, you might be eligible for an even bigger discount.

Once you've got your child care situation sorted, be sure to read some of our tips for saving for college tuition and 5 ways to help your kids pay for college in the Protective Learning Center.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

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Living on a Budget

These days, almost everyone is living on a budget. But if you have young children and work outside the home, chances are that your daycare expenses take a big chuck out of your family's budget. If you want to learn more about how to make child care more affordable, this article may be able to help you find new ways to reduce the cost of child care and save. For more information, visit our learning center.

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