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How to Pay for Daycare

June 11, 2019 · 4 minute read

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How to Pay for Daycare

When you first dreamt of starting a family and your little one was just a distant idea, the thought of childcare costs was probably the furthest thing from your mind. But, it can be a good idea to think about these costs before starting your family.

For many families, affording childcare is an everyday reality. And for some, it’s one of their biggest expenses. You know that having kids can be expensive, but if you have more than one child in daycare, the cost might even be more than your rent or mortgage payment.

Wondering how much to pay for daycare per day? According to the Business Broker Network , the costs of daycare can vary widely with parents spending an average of $35,782 per year or $2,982 per month in Washington, DC and spending just $7,798 per year or $665 per month in Mississippi.

The type of daycare that you decide to use will also affect your costs. The same study found that it is 71% more expensive in Minnesota to send your kids to a formal childcare center than to find home-based childcare. While the price gap is under 40% in most states, getting an in-home daycare provider can be a cost-saving option for some families.

As you raise your growing family, you’ll also incur other expenses and be working toward other financial goals. How can you balance the cost of daycare while still enjoying a comfortable lifestyle? These tips can help you figure out how to pay for daycare while still keeping your expenses in check.

Types of Daycare

There are a number of different types of daycare but one of the most important distinctions is the difference between home-based care and formal daycare programs. Home-based care is typically cheaper than formal daycare options, but there can be some drawbacks so it’s important to thoroughly review your options.

Each state determines their own regulations for home-based daycares. Most require providers meet a certain level of training in order to provide care. Before you select a home-based daycare, you can check the requirements and regulations in your area to find the program that best fulfills your requirements.

You want your child to be safe, so take the time now to ensure you’re working with care providers that are fully licensed and credentialed. Since many of the home-based providers are run by a sole proprietor, you may get less oversight than at a formal facility.

When you entrust your child’s care to a formal daycare facility it’s more likely that the teachers and care providers come with an educational background. Formal daycare centers will also usually follow a more strict curriculum.

If you do decide to go with home-based daycare make sure to check the provider’s references. You can also talk to them about what they do in the home with your child and how they will work to stimulate your child’s learning so that they’re ready for pre-school. Children who don’t get this kind of educational stimulation can fall behind when they start school.

When it comes to formal childcare programs, there are also a lot of different options. Some employers offer childcare programs on site. There are Montessori schools. There are daycares that are more focused on babysitting your children and there are daycares run by early childhood educators that are focused on preparing your child for school.

The more additional services that a daycare provider offers, the more it will cost. For that reason, some families feel it’s important to balance their child’s developmental needs with their budget.

Paying for Daycare

When it comes to how to pay for daycare, just thinking about where you’ll get the money can cause you to break into a cold sweat. But there are a number of ways to find money for your child’s care.

Retooling Your Budget: The first thing you can do is cut back on other areas of your budget in order to free up money to put towards daycare costs. You might be able to cancel your cable, get a lower internet speed, eat out less, or have staycations for the next few years.

Saving in a Dependent Care Account: If your employer provides you with a Flexible Spending Account (FSA), then you can put up to $5,000 in your account tax-free that can be used for daycare . Beware of over-contributing, as anything you don’t use by the end of the year will be forfeited.

Checking on State Money: Each state has a child care assistance program that is designed to help low income parents pay for care for dependents under 13. This program is funded by the federal government.

Using the Child Care Tax Credit : While it won’t help you pay for daycare upfront, you can get a refund on some of your daycare costs by applying for the Child Care Tax Credit. If you itemize your taxes, you can include up to $3,000 in daycare expenses per year per child or $6,000 per family.

Looking into a Loan: If all else fails and you can’t find the money to pay for daycare, you may consider borrowing a personal loan rather than putting your child care expenses on a credit card because of lower interest rates on personal loans.

Finding the right childcare for your family is a personal choice. Regardless, you’ll have to balance your child’s needs with your budget and financial plan. A personal loan may be one way that helps provide you with the opportunity to give your child or children the quality care they need while also keeping your other financial goals on track.

Learn more about personal loans with SoFi.


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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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