May 14, 2014

Five ways to save on childcare costs

2 minutes
Childcare options

Even though childcare costs can be overwhelming, the following tips can help you trim your childcare expenses, if only by just a small percentage:

1. Consider alternative forms of childcare
Don’t make the mistake of dismissing certain types of childcare right away. If you keep an open mind and investigate all of the options that exist in your area, you might be surprised at what works best for your needs and budget. In Massachusetts, for example, daycare costs for two children under 4 years will almost always exceed the cost of hosting au pair, especially in urban areas. In Mississippi, on the other hand, your daycare bill will run less than half of what it would be in MA so daycare becomes a more competitive option from a financial perspective.

2. Take advantage of the Child & Dependent Care Credit
The federal government offers a Child and Dependent Care Credit to families who need to enlist the help of a daycare or nanny so that the parents can work. This tax break provides a credit of 20% to 35% of the first $3,000 in childcare costs you incur per child per year. (The percentage of the credit drops as income rises.) For more information and to see if you qualify visit

3. Take advantage of a pre-tax dependent care account
A pre-tax dependent care account is something many employers offer as a perk to their employees. Your employer will set up the account for you, and you can choose to funnel up to $5,000 of your pre-tax salary into the account. You can later use this money to reimburse yourself for childcare costs, potentially saving you a considerable sum. Two things to note—first, if you are married and file your taxes jointly, the $5,000 cap represents a combined maximum for both you and your spouse; second, you’ll want to plan carefully because leftover funds not used during the year must be forfeited.

4. Take advantage of company discounts:
Check with your Human Resources department to determine if your company offers subsidized childcare or any discounts of any kind with local providers. Some companies also offer back-up care at nearby daycare centers for parents who suddenly find themselves without coverage due to weather, school vacations or a sick au pair or nanny.

5. Fill in the gaps with willing family members
For most families, relying on family members or friends for full-time childcare coverage isn’t an option. But if your mom or brother or neighbor is willing to devote a few hours a week to watching your kids, you can benefit from a cost perspective while your child gets one-on-one attention from a loving adult. Though you wouldn’t expect to pay a family member or friend the same hourly rate as a daycare center or nanny, it’s a good idea to offer at least minimum wage in your state. If they refuse? Thank them with homemade cookies, a spa treatment or gift certificate to a trendy restaurant.

Even though childcare can be one of the biggest expenses for young families, there are ways to make it more affordable!