How to Pay for Daycare

By Janet Siroto · December 22, 2023 · 6 minute read

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How to Pay for Daycare

Raising a child could be one of the most rewarding experiences you’ll ever know, from watching your little one grow, seeing their interests take shape, and sharing all kinds of experiences with them, from baby’s first trip to the beach to high school graduation.

But there are practical matters to consider as well when a baby arrives, including paying for your child’s care. Those expenses start coming at you quickly after your little one is born. Daycare, for instance, can be an urgent expense. Currently, the average weekly cost of daycare is around $216, which is just over 17% of the median national household income.

Making ends meet can be a challenge for many families. Perhaps your budget was running smoothly but now you have to accommodate this expense. Or maybe you are wondering how you can move ahead with saving for a house when you’ll have less money to stash into savings. Read on to take a closer look at the kinds of daycare available and wise strategies for making ends meet.

Types of Daycare

Yes, there’s a considerable cost to raising a child, and daycare is part of that. It can allow you to continue to work or attend to other priorities and ensure your little one is well cared for.

That said, 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 Daycare

Home-based, or informal, 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 to 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 on sites like this one at or visit your state’s website. You can likely find the information you are seeking via the Office of Children and Family Services.

It’s likely that safety will be one of your top concerns. Check that childcare providers 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. That is, the operator may be so small that it’s not required to be licensed.

Licensing, however, can be a very important factor. It ensures such things as:

•   Criminal background checks for the staff

•   Training in such matters as CPR, safe sleep habits for children who are young enough to be napping at daycare, and first aid

•   Proper sanitation

•   Emergency and safety preparations.

Ask about the care providers’ background and qualifications. It’s more likely that those working at formal daycare centers (more on those below) will have specialized training. For instance, the work could be a side job for a teacher.

If you do decide to go with home-based daycare, make sure to check the provider’s references carefully, even if they have the appropriate licenses. You can also talk to them about the schedule for children in their care and how they will work to stimulate your child’s learning so that they’re ready for preschool. Many parents or prospective parents may ask to visit and observe how the daycare operates.

Formal Daycare

When it comes to formal childcare programs, there are also a lot of different options. Some employers offer childcare programs on site; others are Montessori schools or affiliated with other educational institutions. There may be some that are operated as franchises in your area.

Their approaches will probably vary as well: Some formal daycares aim to provide a cozy, relaxed atmosphere, while others focus on early childhood education and skill-building.

It may be wise to tour a few different options, just to get a fuller picture of how your child will spend their day. You’ll want to see what the premises and caregivers are like and understand the flow of the day.

Often, the more additional services that a daycare provider offers, the more it will cost. For instance, if you are looking for a bilingual daycare, it will probably cost more than one in which just English is spoken, as the provider has to spend more time and energy hiring its staff. Also, the more personalized the care (as in, the lower the child-to-caregiver ratio), the more expensive it may be.

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Paying for Daycare

When you start a family or expand it, the expenses can come at you in a flurry: doctor’s appointments, food, clothing, furniture, strollers, and so forth. That alone is enough to stretch your budget to the max. Add daycare to the mix, and your income can feel the pressure.

Here, some steps to help you afford childcare.

Retool 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 lower your food costs, say, or have staycations for the next few years.

If you don’t have a budget or aren’t happy with how yours is working, consider the different budgeting methods available, and experiment to find one that’s the right fit.

You might also look into apps to help you monitor spending. Your financial institution, whether a traditional or online bank, may have tools to help you do this.

Save 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, however; anything you don’t use by the end of the year will be forfeited.

Check on State Money: Each state has a child care assistance program designed to help low-income parents pay for care for dependents under 13. This program is funded by the federal government. You might see if you qualify.

Use 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 get a tax credit by including up to $3,000 in daycare expenses per year per child or $6,000 per family.

Look 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 daycare expenses on a credit card. You’ll likely enjoy lower interest rates with a personal loan.

Recommended: Guide to Paying for Child Care While in School

The Takeaway

Finding the right childcare for your family is a personal choice. The main options are home-based or formal daycare. Regardless, you’ll have to balance your child’s needs with your budget and financial plan. There are options such as budgeting, taking tax credits, getting government assistance, or taking out a loan.

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