If caring for your little one is taking a bigger and bigger bite out of your budget, try these six tips and save money now.
A version of this article originally appeared on Learnvest.com.
As a working mom, few things frustrate me more than feeling like every cent I earn goes straight toward paying someone else to raise my child.
And I’m not alone: A new study shows that even in this weak economy, child care costs are rising through the roof. According to Child Care Aware of America, in 36 states the average annual cost of having a kid in daycare now exceeds in-state college tuition.
In all 50 states, having two kids in daycare exceeds rent. The worst offenders? New York, where parents cough up $14,009 per year for an infant (it’s also where I live, so I feel this pinch personally), followed by Minnesota, Oregon, Colorado, Hawaii, Kansas, California, Illinois, Massachusetts, Indiana and Wisconsin.
Aside from moving to Europe (where governments actually pay parents to have kids), I figured there wasn’t much I could do to lower my child care costs. But after doing a little research I was pleasantly surprised to find out I’m wrong. Here are a few tips on trimming this expense, many of which I’ve cashed in on myself.
1. Take a Tax Break
The IRS offers tax breaks to working parents in the form of a Child and Dependent Care Credit, which reduces your taxable income. Anywhere from 20-35% of your child care costs may qualify, with a cap of $3,000 per child and $6,000 for more than one child. Find out exactly how it works here in our Knowledge Center, and be sure to ask your accountant if you qualify.
2. Open a Flexible-Spending Account
According to a study by Hewitt Associates, 96% of employers offer a Dependent-Care Flexible-Spending Account. They work just like health FSAs—only instead of setting aside pretax dollars to pay for medical expenses, you set aside pretax dollars to pay for daycare, babysitters, and day camps. A maximum of $5,000 can be allocated for this purpose per year. Just keep in mind that this may impact the tax breaks you’d get with the Child and Dependent Care Credit (above). Your best bet is to plan your strategy with your accountant.
3. Get a Company Discount
Some larger corporations have negotiated discounts with nearby child care centers. Ask if your company has such an arrangement, or if they don’t, ask human resources to explore this possibility. Since it doesn’t cost them anything, they may be willing to look into it.
4. Explore Shared Child Care
Depending on your situation, a nanny share—in which two families pay in toward the cost of one nanny may be a good way to defray your costs, and the low caretaker-to-child ratio may lead to advantages for your child in the long run. When your kids get a little older, you could also look into a preschool co-op that you form with other parents, like this mom did.
5. Search for Nonprofits That Care for Kids
Your local YMCA, JCC, or church may offer child care services that cost far less than you’d pay at a private business. The reason for this is nonprofits don’t need to rake in cash or answer to shareholders.
On Sittercity.com, you can name your price for a sitter, so don’t be afraid to lowball—you’d be surprised who may bite if it’s convenient and works with their schedule. In fact, we spoke to the founder (and mom of twins!) here to find out more about how the site works.
-Written by Judy Dutton
Related links from LearnVest:
- Why Costs for Parents Just Got Higher
- The LV Guide to Nanny Shares
- Sign Up for LearnVest’s Debt-Diminishing Financial Bootcamp