With the cost of child care on the rise and the economy on the decline, what's a parent to do? Whether you're sending your child to a day care center or opt for in-home care, the average cost of caring for a two-year-old child in the U.S. is $611 per month, at minimum, and up to $1,000 per week in many metropolitan areas in 2008, according to Runzheimer International. Fortunately, parents can cut child care costs by establishing some of the same tenets they instill in their kids - being creative, asking questions and thinking before they act. (To learn more, read Budgeting For A New Baby.)
A good childcare financial plan starts with the following steps:
Explore Financial Aid
Good child care budgeting can start right in your own office, if your employer offers a flexible spending account (FSA) program. FSA plans enable parents to set aside pretax dollars for child care expenses. Employees can contribute a maximum of $5,000 in their FSA accounts in 2009, but the money can be used for a wide variety of child care expenditures, including daycare facilities, nannies, baby sitters - even summer camp programs. Some employers also offer dependent care benefits, which are just another form of flexible spending accounts. (For related reading, see Benefits Of a Dependent Care Flexible Spending Account.)
Use Tax Leverage
Uncle Sam might pick up some of your child care tab via a tax credit for children and dependents. Paid with after-tax dollars, and subject to income eligibility requirements, the tax credit may allow you to claim up to 35% of your child care payments to a maximum of $3,000 per kid or $6,000 for more than one kid in 2008. If you're already taking advantage of your employer's flexible spending account, you can't claim the same expenses for the FSA and for the child and dependent care credit. While you can take advantage of both plans, the U.S. government requires that you subtract the amount you have placed into an FSA account from the expenses you use to calculate your child care tax credit. IRS Form 503 has more information. (To learn more, read How To Claim A Dependent.)
Barter for Care
You can also shave the costs of child care by bartering your services, such as offering to provide a service for your child's day care center. For example, a professional accountant could review the day care's tax situation or a marketing manager could help create a newspaper ad for the day care provider in exchange for free or discounted child care services.
On a more neighborly-based level, you can offer to exchange babysitting services with a friend, family member or coworker. Some parents even launch babysitting co-ops in which members compare schedules and trade dates for child care services. No money changes hands - the cash stays in your pockets.
Hire a Responsible College Student or Au Pair
College students are viable child care options - they're cheaper than nannies, and parents get to keep their kids at home, where the child (and probably the parent) is more comfortable. You can expect to spend a decent amount of time screening quality applicants (tip: tie your child care provider's fee to reliability, rewarding on-time and consistent schedules and penalizing late arrivals and missed dates) but you can save a bundle with the right candidate. .
Explore Flex Scheduling or Telecommuting to Work
A tag-team approach where each parent leverages a flex schedule at work can slash child care costs. More and more parents are working from home or switching their hours to later in the day, making flex scheduling a great child care budget saver. As a bonus, this enables you to spend even more time with your kids. (To learn more, readConsider The Outcomes When Cutting An Income.)
Above all, plan ahead. Establish goals and needs before you begin your child care cost-cutting campaign. Talk to your employer and see what your company offers. Talk to family, neighbors and coworkers and ask for tips (if not help). Check the websites of accredited child care organizations such as the National Child Care Information and Technical Assistance Center, a division of the U.S. Department of Health & Human Services. And whatever decisions you make, ensure money and finances take a back seat to the safety and well-being of your child.