My wife and I adopted a child from the US foster care system — he was three years old when he moved in with us. Since this was our first kid and the move was kind of sudden, I didn’t have much time to research or prepare childcare options. And DANG what rude awakening it was to learn how expensive childcare costs are in the US!
I live in Los Angeles, where regular daycare ranges between $1,500 – $3000 per month. That’s per child! So if you have two young kiddos, double that figure.
Since I needed to find help on a whim, I ended up joining an in-home daycare with tuition of $2,550 a month. This was the middle of a school year, and many cheaper alternative places were fully booked or had long wait lists.
Luckily, after months of paying through the nose, we were able to drastically save money on childcare costs by moving to another cheaper state-run facility. I also found some government assistance programs, cheap summer camps, as well as reduced my work hours to spend more time and bond with our new son.
Ways to save money on childcare costs
As a parent, you’re probably keenly aware of the childcare line item in your budget, especially if your kids are younger. Not all of these ideas and options apply to everyone’s situation. But it’s worth researching everything you can to save money on childcare costs.Â
Even if it only saves you a few bucks, that’s money you can put towards more valuable things for your family.
Here are a few things to think about that might bring down the cost of childcare…
1. Explore government subsidies:
First, check if you qualify for any government programs that offer financial assistance for childcare. There are both state and federal ones available. Here are some examples:
- Child Care and Development Fund (CCDF): This is a federal program that provides funding to states to offer childcare assistance to low-income families. Check out the Office of Child Care website for details.
- Child Care Aware: Each state administers its own childcare subsidy program. Eligibility varies depending on your state and the program. You can find your local Child Care Resource and Referral (CCR&R) agency here and get specific information about your state’s program.
- Temporary Assistance for Needy Families (TANF): TANF provides financial assistance and work opportunities to low-income families. And some funds may be used for childcare! Check out the Office of Family Assistance for those details.
- Head Start and Early Head Start: These programs offer free early childhood education, plus health and nutrition services to eligible low-income families. Here is a link to the Head Start Program Locator
While many government programs are specifically designed for low-income families, it still helps to inquire about assistance available in your state. Eligibility varies greatly by state so it’s always worth looking into!
2. Apply for child tax credits
Tax credits might not provide immediate financial relief. But hey, anything is better than nothing! Here are some federal and state tax credits you can look forward to when you have dependents…
- Child and Dependent Care Tax Credit: This federal tax credit allows working parents to claim a portion of their childcare expenses. The credit amount depends on your income and the number of children.
- Earned Income Tax Credit (EITC): This refundable tax credit benefits low to moderate-income working individuals and couples, particularly those with children. Here are the details on the IRS website.
- Local Departments of Social Services: Your local social services office can provide information on available childcare assistance programs in your area
- State Tax Credits: 15 states have enacted a child tax credit in addition to the federal credit. These range from $25 all the way up to $1,750! Learn more about them here: National Conference of State Legislatures – State Child and Dependent Care Tax Credits
3. Use Flexible Spending Accounts (FSA):
No, we’re not talking about Healthcare FSAs – we’re talking about Dependent Care FSAs! The Dependent Care FSA helps save money on the cost of childcare expenses by letting you pay for things with pre-tax dollars. Eligible expenses are things like daycare, preschool, and summer camps for children under 13. You can also use an FSA to care for dependents who are physically or mentally incapable of self-care.
The primary advantage of an FSA is that it reduces your taxable income, which means it can help save money on childcare costs by your personal tax rate within the given year. Employers offer FSAs as part of their benefits packages – so you’ll need to check with your workplace to see what they offer. Sadly, self-employed individuals are not eligible for FSAs.
Enrollment in FSAs typically occurs during your employer’s open enrollment period, and you must decide how much money to contribute for the upcoming year within the IRS limits. For 2024, the maximum contribution limit for a Dependent Care FSA is $5,000 per household.
One important note: Any money in an FSA account must be used within the calendar year. There’s no “rollover” from year to year, so whatever you contribute to an FSA, make sure you use it!!
4. Explore employer benefits:
Some employers offer childcare benefits or subsidies. So be sure to talk with the HR department at your workplace to see if they provide any assistance for childcare. Large employers might have partnerships with local daycare centers, which can reduce costs.
Personally, my employer offers zero benefits because I’m a contractor. But, when I shared that my family was expanding and I might need some wiggle room at work, they bent over backwards to offer any help I needed. They offered me a more flexible schedule, some holiday pay, and a lot of leeway on deadlines.
So even if you work for a small employer with no official childcare or family benefits, it’s in both of your best interests to share your family situation in order to work out a win/win solution. Remember to be courteous and professional when discussing benefits and asking for help.
Pro tip: If you haven’t done so recently, perhaps it’s also a good time to negotiate a pay raise. Any extra pay can be put towards childcare costs.
5. Join (or Start) a Co-op for Childcare:
A co-op is basically when parents each take turns to babysit or watch each other’s kids. Some official co-ops might require a small monthly fee, and be hosted at a licensed daycare facility. In exchange for cheaper fees, they also require you to work there for some of the days each week and help look after the children.
Unofficial co-ops are common too. They’re basically private groups of parents that share childcare responsibilities. But you’ll need to ask around and network to find one. And obviously you’ll only want to join groups that you trust 100%. There are a few apps that exist where parents can find or start a private co-op for childcare. Check out SittingAround to see if any parents in your area are looking for something similar!
6. Lean on Family and Friends:
It can be tough asking for help. But, desperate times call for desperate measures! If you have friends and family that are great with kids and have some spare time, why not ask them to look after your children.
It doesn’t have to be a full-time thing, and you could even offer a small amount of compensation to make it a win/win. A friend of mine ”pays” his mom (with wine and dinner) to look after his baby every Thursday and Friday. This saves him two days of childcare cost every week, and has the added benefit of increasing meaningful family time.
Personally, my parents live in Australia. So it’s hard to ask them for regular help with kids. But, when my son first came into our house I offered to fly my mum out for two months to live with us. The cost would have been a $1500 plane ticket, but also would have saved me two months of childcare. We didn’t end up going through with this plan, but it’s just an example of something that’s worth your consideration.
7. Reevaluate Work Options
You’ve probably already done the math to see which is cheaper – continuing to work and pay for full-time childcare, vs. leaving your job and becoming a stay-at-home parent…
Sometimes it’s not so cut and dry. And it’s definitely not a decision solely based on math.
Arranging flexible work hours or remote work with your employer can reduce the need for full-time childcare and help you save money. Ideally, you won’t take too much of a pay hit, but it’ll save you on daycare costs and let you spend more time with your kiddos.
One of the best decisions I ever made was to reduce my work hours so that I could spend a few years bonding with my son at an early age. Although he was in preschool, we chose a place that let out quite early every day, which let me spend afternoons with him. This daycare was cheaper with shorter hours, saving us a ton of money.
Ps. If you’re ever considering taking a year off of work, doing it while you have young kids could be a great choice. Not only will you save a ton of money on childcare costs, you can use that full year away to reconsider your professional life. Heck, take 2 to 3 years off if you can financially afford it. It will change your life.
8. School-Based Programs:
When my son turned 4, he was eligible for Pre K at our local elementary school. This is a pre-kindergarten class, and it’s 100% free. It saved me an entire year of private preschool, and helped get my son ready for kindergarten.
Check if your child’s school offers a Pre K or TK class (stands for Transitional Kindergarten). Your local elementary school might also have a preschool program offered by Star Inc, which is a non-profit educational organization attached to US public schools. They start helping kids as early as age 3!
Star also offers before and after-school programs, which are more affordable than private childcare. You can pop down to your local elementary school to ask all about it!
9. Local Resources and Community Programs:
Churches, community centers, and other local organizations often have affordable childcare options. Here are a few you can research:
- Churches and Religious Organizations: Check with local churches to see if they offer daycare services to the community at lower costs. Some churches also run preschool and early education programs.
- Mother’s Day Out: Search online for “mother’s day out” events in your area. These programs typically provide part time childcare, like 2-3 times a week.
- Local YMCA: The YMCA and YWCA offer various childcare programs, including after-school care, summer camps, and daycare services. They often have sliding scale fees based on income. Also, look into the Boys & Girls Clubs of America
- Community Rec Centers: Check out your city or county’s parks and recreation website to see what is offered. My kid has done summer camps at our local rec center since age 4. He loves them, and they are cheap!
- Nonprofit Childcare Centers: You might be in luck finding a childcare center in your area that’s not-for-profit. These can be cheaper than commercial centers, and usually provide subsidies for low income families
- University Childcare Centers: Check your local community colleges and universities to see if they have childcare programs available.Â
- Libraries: Public libraries often offer storytimes, reading programs, and other kid activities that can provide short-term childcare or educational opportunities.
10. Babysitters and In-Home Care:
Daycares and preschools are great because your kiddo gets to interact with other children and learn valuable social skills. But sometimes hiring a part-time nanny or an in-home babysitter can be more affordable.
Shared nanny services might be an option too if you find another family that doesn’t need full time care. You could possibly split the costs of an in-home nanny and split days of the week. I have some friends in LA that do this, and both families have 3 kids each. The nanny is actually a big part of their lives, and also does basic cooking and cleaning for the households.
Nannies usually are found via referrals, so start by asking your friends, family, and coworkers. You can also meet nannies at the local park, or find services advertised on community boards like at the library.
11. Budget and Plan Ahead
Kids are expensive. And full of surprises. There’s no way to predict every single little cost of raising a child that will pop up in life.
But, the sooner you start socking away money for kids, the more prepared you’ll be when bills start racking up.
If you don’t have a robust budgeting system right now, you should create one. Budgeting not only helps you save up money for planned expenses, it also helps cut costs in other areas of life so your overall financial position is stronger.
We recommend using a modern budgeting software like You Need a Budget (YNAB). There’s a small monthly fee, but YNAB users on average save over $6,000 in their first year budgeting with the software. It’s incredibly smart and kind of fun. Try it!
The Bottom Line:
Finding small ways to save money on childcare costs can make a world of difference for your family’s budget and peace of mind. You might feel like a newbie parent paying through the nose right now. But after tapping into local community resources, exploring better work arrangements with your employer, and taking advantage of tax credits and FSAs, you’ll feel like a pro.
Every family’s situation is unique. So it’s really important to evaluate all your options, and constantly ask other parents which tricks are working for them. Get proactive about finding cheap and free local resources – they are there if you search for them. You are not alone!
Lastly, remember that raising kids is about creating wonderful memories and enjoying every moment, not just about saving money.
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