Whileparenthood isn’t cheap to begin with, childcare is one of the biggest expenses families face. A look at the numbers proves what a hugeburden paying for childcare has become—especially for families with average or low incomes.

In the state of Massachusetts, for example, full-time care for an infant cost an astronomical$20,125 in 2016.Single parentsin Massachusetts earned a median income of $28,389, meaning they would have to pay 70.9% of theirincome for daycare. Even married couples who earned an average of $117,2017 that year would have tofork over more than 20 percent of their gross pay for care for one child.

Other states present similar quandaries for parents, and that’s true even in states where daycarecosts are lower. A good example is the state of Utah. Here, the annual cost of infant care in acenter ($12,249) is 45.5% of the $26,942 median income for single parents.

It gets worse. According to the2017 Parents and the High Cost of Child Care Reportfrom ChildCare Aware, the price for child care for two children exceeds housing costs forhomeowners with a mortgage in 35 states and the District of Columbia. Now, that’s a problem.

Childcare options to consider

Fortunately, you do have some say in how much you pay for childcare, since there are multipleoptions available. Childcare options to consider include:


Daycare centersare a popular option for parents since they provide standard and predictable care they can counton. Many parents choose a center so they will always have a place to take their child while theywork, and many daycare centers offer educational programs, playgrounds, and hands-on activities forkids. Daycare centers can be less personalized, however, which is why many parents preferone-on-one care.


Infant care in a daycare center cost $10,926 annually on the national level in 2016, while in-homedaycare centers cost $7,961. Annual prices for toddlers were $9,562 and $7,398 respectively thatyear. If you want to pay less for daycare but still want to use a center, you’re almost alwaysbetter off choosing a small in-home daycare.


Many families who don’t want to deal with a daycare center choose tohire an in-home nannyinstead. This choice comes with the benefit of having childcare come to you versus driving to acenter. Your children will also receive personalized care and the undivided attention of theirnanny.


According to Care.com, nannies earned an average of $13.63 per hour or $28,354 per year in 2016.Nannies with college degrees earned more. Also keep in mind that there are tax implications thatcome with hiring an in-home nanny. For example, you may need to withhold federal and state taxesfor them, and you will likely need to pay for unemployment plus social security and Medicare taxeson top of their salary.

Au Pair

Au pairs are similar to nannies in the fact that they care for your children in your home. However,they are typically brought overseas for the program, and they live under your roof. Au pairs can bea good fit if you don’t mind providing room and board and want live-in help, but not everyone wantsor needs 24/7 assistance. Also, au pairs can be a lot more expensive than traditional daycarecenters.


Costs for au pairs vary depending on the agency you work with and other details. However, you mayneed to pay a match fee ($400+) and an annual agency fee ($7,800 – $10,000) on top of aweekly stipend of $200 – $250. In total, these costs can add up to $20,000+ per year on topof room and board.


A babysitter is another option to consider if you only need sporadic care. The benefit of ababysitter is the fact that they may come to your home and they can be less costly. On thedownside, babysitter care may be less reliable since your provider may not watch children full-timeand may need to pursue other types of work.


Babysitters earn an average of $13.97 per hour, although their pay varies depending on where youlive, how many kids you have, and the caretaker’s level of experience.

Can you afford to be a stay at home parent?

With childcare costs eating up a large percentage of many parent’s salaries, some ultimately decideto stay home full-time or work only part-time. While this option can make financial sense, thereare long-term considerations to make as well.Spending time out of the workforce can make it more difficult to find work once your children reachschool age, for example.Parents who stay home several years may also lose career momentum and miss out on promotions basedon their decision. For these reasons and others, parents must evaluate the costs of missing out onwork while their kids are young—even if daycare costs are eating up a large percentage of oneparent’s salary.

New tax credits, flexible spending accounts, and state subsidies

While it’s unlikely that childcare costs will go down any time soon, there is some good news on thehorizon. For starters, the recently passed tax reform bill doubles the Child Tax Credit from $1,000to $2,000. This tax credit is also available for married couples with adjusted gross incomes of upto $400,000. The previous rules phased this credit out for couples with incomes of $110,000 ormore.Second, you may be eligible to contribute to a Flexible Spending Account (FSA)—a pre-taxaccount you can use to pay for eligible childcare expenses. These accounts can save you 30 percentor more on childcare, and they may be offered through your employer.The Child Care and Development Block Grant Act (CCDBG) was signed into law in 2014, providesongoing subsidies for low-income families who need help covering childcare expenses. Under thislaw, almost all states were forced to increased income limits for families eligible for subsidiesto 85 percent of their state’s median income.Since state childcare subsidies are governed the states themselves, however, you’ll need toresearch health and social services, financial assistance, and resources on a local level. Thismapfrom ChildCare Aware can connect you with the appropriate services based on where you live.

Using your credit card to leverage childcare for rewards

If you can afford childcare but want a return on your investment, you can also consider leveragingthis sizable expense to earn credit card rewards with a credit card. For this strategy to work, youonly need to confirm that your daycare provider accepts credit cards as payment.Many of the top cash-back credit cards offer 2% back or more for ongoing expenses—essentiallyfree money, provided you pay your credit card bill in full every month. If you spend $20,000 peryear for care at a corporate daycare center, a card that offered 2% flat cash-back would net you aneasy $400 in cash back, for example. You may also be able to earn a signup bonus for getting a newcard and meeting a minimum spending requirement within a few months.Travel rewards cards can also help you turn your childcare expenses into free airfare, hotel stays,and other perks. If you’re going to pay for daycare every month, you might as well get somethingback.

Originally posted onBankrate.

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