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How to Pay for Childcare

Child care is one of the largest expenses many families will face. Most American households with children spend between 10 and 25 percent of their household income on childcare. Only two years ago, the Economic Policy Institute found that full-time childcare for a 4-year-old is more expensive than in-state public college tuition in 23 states.

Not only are families faced with figuring out what they can afford for childcare, but they must also decide what type of care they want and then find a quality care provider. To help with the research and decisions surrounding childcare, below is a look at the different options and ways to pay for it.

Childcare Options

  • Day Care Center/Group Day Care: These state-licensed facilities care for children of varying ages, usually separated into age groups. Caregivers have training in some form of early childhood development and will be certified in CPR and first aid. These facilities may offer more in the way of stimulating toys and development activities, but the groups of children are larger as is the child-to-adult ratio.
       
  • In-Home Day Care: This childcare option is run out of the provider's own home. They may care for their children while also watching yours and others. Some in-home day care providers pursue training and are state-licensed, but not all. The adult-to-child ratio is lower, but if the provider becomes ill or goes on vacation, parents are usually on the hook for finding a back-up babysitter.
       
  • Au Pair: An au pair is an international nanny that lives with a family for a year while providing childcare services on a 40-ish hour/week basis. They sometimes take college classes or travel when not caring for the kids. The family provides room, board, and a stipend. Au pairs are usually less expensive than a nanny, but they may have less training.
       
  • Nanny-Share: With a nanny-share, you and another family split the services and cost of a nanny. Families may rotate houses where the kids are watched. If you only have one or two children, this option can provide the personal attention and in-home care of a nanny at a fraction of the cost.
       
  • Family Member: A trusted family member who is retired, has a flexible work schedule, or already stays home to watch their own kids could be an option for providing childcare. Cost is usually low, but their schedule might be less dependable.

Ways to Pay

Besides a family’s income, there are other ways to pay for child care costs. The Child Care and Development Fund (CCDF) provides money to pay for subsidize childcare and isn’t restricted to those already on welfare programs—in fact, it’s used to help families avoid relying on government assistance. Money from CCDF can be used for care in a certified day care facility or in your own home. Check your state’s eligibility requirements for more details.

If the parent(s) is a student working to complete their secondary education, many schools provide subsidized or low-cost childcare. Funds for these programs often come from The Department of Education’s Child Care Access Means Parents in School Program to help low-income students with children graduate with a degree.

A dependent care flexible spending account (FSA), offered through an employer, is another way to save and pay for child care, including preschool and summer day camps. Married couples filing jointly, and single parents, can save up to $5,000 per year in the account for child care expenses. Filing separately, a parent can save up to $2,500. Be aware that in most cases, money in FSA accounts not spent at the end of the year do not roll over and are forfeit.

Lastly, there are businesses, such as Bridgecare Finance, that offer specialized loans for child care and preschool costs. Care providers must be in-network (similar to an insurance plan) or be willing to work with the company. Like other loans, interest rates and loan amounts depend on the borrower’s credit history and score; however, these loans differ in that money is released in installments and the loan repayment period can be longer.

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