5 Creative Ways To Afford Skyrocketing Childcare Costs

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It’s tough for working parents to make a living and afford childcare in the best of times. With high inflation over the past few years, childcare costs have skyrocketed even further, putting parents in a tough spot.

The national average price of childcare for 2023 was $11,582, according to Childcare Aware of America, which requires 10% of a couple’s median income to be able to afford. The city of Washington D.C. and states like California, Massachusetts and New York are among the highest overall in costs, according to the Economic Policy Institute, with the average in Massachusetts being $20,913 and in California, $16,945.

While not using childcare isn’t likely an option for most working families, there are some ways to defray these high costs while still getting quality care for your children and keeping more of your income. 

Employer Sponsored Dependent Care

Employed people should check with their employer to see if they offer a dependent care FSA plan, or other kinds of subsidized childcare plans, according to ADP.

A dependent care FSA or dependent care assistance plan (DCAP) both allows the employee to set aside money, tax free, for childcare costs and allows employers to match funds.

There are typically limits on how much an employee can contribute, however, to remain tax free, so be sure you investigate your state and federal limits each year.

Tax Credits

The Federal government also offers some tax credits for child and dependent care expenses. These allow you to write off the expenses you paid for qualifying individuals who took care of your children in a calendar year. How much you can write off depends on your adjusted gross income.

It also comes with a dollar limit, meaning you may not be able to write off every dollar you spent, but a maximum. For 2024, the limit is $3,000 for an individual and $6,000 for a married couple, according to the IRS.

In-Home Daycare

Another way to reduce childcare costs is to seek out home-based daycares versus center-based care. According to the US Department of Labor’s blog, in-home based childcare tends to be less expensive than traditional childcare centers.

In a comparison of three different age groups, with price ranges varying based on location and population, the difference in annual cost of childcare were as follows:

• Infant home-based: $6,486 to $11,018.
• Infant center-based: $8,310 to $17,171
• Toddler home-based: $6,363 to $10,135.
• Toddler center-based: $7,529 to $13,500.
• Preschool home-based: $6,171 to $10,045.
• Preschool center-based: $6,949 to $12,307.

As you can see, the home-based services often save thousands of dollars per year.

Nanny Share

Obtaining the services of a nanny can be costly, but in some cases, you can share the services of one nanny with another family. When sharing a nanny, the same nanny will spread her time between yours and others’ homes. You might have different days of the week or hours in a day depending on how the nanny divides the time.

This can potentially allow you to pay as much as two-thirds below the normal rate of a nanny, according to Nest Payroll. Of course, it makes the most sense to each pay the nanny out of your own separate accounts, and not to try and pool payments.

This works well when you also know and have a good relationship with the other family utilizing the same nanny’s services.

Family and Friends

The luckiest of people can keep their costs low if they have helpful family members or friends willing to watch their kids for little to nothing. Whether this is a grandparent, a sibling or just a friend, there’s nothing better than having a person you and your children know and care for overseeing your child’s care.

Another variation on this theme is to do childcare trades with other parents, if schedules allow. Other possibilities could include negotiating non-traditional hours or remote work.

Ultimately, most families only have to figure out how to pay for these costs until their kids start Kindergarten.

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