Today’s post is the sixth in our ‘Cost of Raising Baby’ series. In previous weeks, we’ve discussed formula, diapers, clothing, medical care and miscellaneous expenses. This week we will discuss perhaps the largest expense you will have during that first year: infant child care.
Before getting into the numbers, I have a disclaimer to make. My wife and I opted for the stay-at-home mom route, so we actually have no child care costs. But I know that in doing that, we are the exception rather than the rule. A large majority of today’s households are two-income households, with both spouses working. A lot of times this is due to necessity, and sometimes both parents just really enjoy their careers and want to keep working. Whatever the case may be, if you are expecting a child or considering having one in the future, you should consider the cost of infant child care. (On a side note, stay tuned for a future post next week on how to get by on one income)
There are basically two forms of child care available: day-care and nannies.
Sending your child to day-care
Day-care is by far the more popular (and less expensive) option. You drop your child off on your way to work, and then pick your child up on your way home after work. Now, there are different choices within day-care. There are many chain day-care facilities (ex. GrowingKids), church daycare facilities, and in-home day-care facilities. There are advantages and disadvantages to each. Chain and church facilities tend to cost more than in-home facilities, but they generally have more staff and offer more activities (activities are not so important for infants, but more important as your child gets older) than in-home facilities. However, they also have more children, so your child may not have the personal attention that they might have at an in-home facility may provide. It is important here not to let cost alone decide which option you choose. Your child is one of the most important things in the world, and you need to be sure that whoever is caring for your child is going to do a good job. It is important to conduct interviews with the staff and tour the facility to make sure your child will be cared for appropriately.
The average cost of a chain or church day-care facility for an infant in their first year generally runs around $125 a week (around $500 a month). You can generally find in-home day-care for less, but you have to spend more time interviewing. Obviously this “average” is not going to apply to everyone. In New York, for example, you can expect to spend $1,500 a month or more on day-care.
Hiring a nanny
A less popular option (and more expensive) is to hire a nanny to come to your home and watch your child while you are away at work. With this option, you can be assured that your child will have one-on-one attention while you are away. You don’t have to worry about your child being left alone at a daycare while the staff is scrambling to take care of a bunch of other children. However, you have to be very careful about who you hire as a nanny. You need to make sure to conduct thorough interviews, complete with background and reference checks. Again as I mentioned earlier, your child is one of the most important things in your life. You don’t want to leave your child with just anyone.
Many nannies are hired on an hourly basis, though you can also do this on a daily or weekly basis. You can expect this to cost significantly more than a daycare, though, ranging anywhere from $200 to $500 a week.
Strategies to reduce the cost
First and foremost, don’t let the price of care alone determine where you send your child. I can’t stress this enough, make sure you do the legwork to make sure the facility is providing quality care for your child.
One thing to note is that child care costs are tax deductible up to $5,000 a year. Assuming you pay the average $500 a month for daycare, you will reach this full amount. The result is tax savings of $750, $1,250, and $1,400 (respectively if you are in the 15%, 25%, or 28% tax brackets). So, the net cost of childcare would be $5,250 (15% bracket), $4,750 (25% bracket), and $4,600 (28% bracket).
Another strategy that a lot of people I know use is to have their retired parents watch their children. Obviously this depends on a lot of variables. You need to live close to your parents or in-laws, they have to be retired and have the time to watch them, they have to be physically able to watch them, and they have to be interested in watching them. I know this is not for everyone, but it can save a lot of money.
Child care is expensive and, at an average cost of $6,000 a year will most likely be your largest expense. But make sure you take the time and do the research before allowing just anyone or any facility to watch your child.