Childcare Costs: The Price of Raising Kids
- Written by Isaac
Having kids is expensive. Raising a child costs nearly a quarter of a million dollars. A nice chunk of that is childcare costs.
After a few years of marriage, my wife and I decided to embark on the monumental task of creating a human being from scratch. Once that was accomplished, the reality set in that we wouldn’t be able to spend all of our time with said human being. We, unfortunately, would have to find someone else who would get the privilege of spending their days with our child while we paid them for the honor.
We Didn’t Go In Blind
Now, I always knew the cost of having a kid was legit, and it obviously factored into my wife’s and my decision of when to have children. While I was mentally prepared for the increased monthly costs (and inevitable cutbacks – goodbye Yankees season ticket package), there was still a huge shocker that awaited me: childcare.
But We Weren’t Expecting This!
Now, you always hear everyone talking about saving for college, different types of strategies, investment accounts, etc. However, when you start to do the math, childcare in many instances could cost more than college. And it’s an IMMEDIATE cost. Why aren’t more people talking about that?
College Savings Accounts -Leveraging 529 Plans
College costs are rising. If you have kids and want to help them pay for college, the earlier you start a 529 Savings Plan, the more it will grow.
This will vary widely depending on where you live, but since I’m one of those fools who decided to settle down in a ridiculously expensive metropolitan area, all numbers below are reflective of the New York City region.
Before I shock you with a few quotes, let me just mention that “Guess the insane price/sacrificial offering to the daycare industrial complex” was one of our favorite games to play with our other child free friends. Clearly, no one who had yet to undertake the task had a clue as to what it would cost them, ourselves included.
Do Some Research
My wife did a great job of compiling an initial list of 20-25 childcare centers in our area. With so many options to choose from, this shouldn’t be a problem, right? Surely one of them would meet all of our needs and be affordable!
You’ll Have To Dig Deep
A bizarre feature of childcare is that there are nearly no reviews of centers/schools on the various social media sites we’ve grown accustomed to. Yelp, Google – it’s like the internet has been scrubbed of reviews and pricing comparisons for any of these places.
None of them even post their tuition rates online—you have to call or even visit the center in person to receive a quote. Perhaps they know that if they posted the figures on their websites, people would simply close out of their browsers and re-up their birth control prescription.
So, my wife made the calls. The first daycare quoted her $2,320. Per month. PER MONTH! That’s more than our mortgage! Extrapolated over the year, we’re talking $27,840!
After I caught my breath and got over the initial panic, I told myself that this was just the first of many options – our first call just happened to be to the one where they seemingly purchased toys made of gold for the kiddies.
In the end, I was half right—crazily, close to 90% of the schools in our area were charging similar rates. However, by expanding our search radius a bit, we did manage to also find schools that quoted us $1850, $1600, $1300, and $900 per month.
Financial Things To Consider
Without getting into the details of what you “should” be looking for when reviewing daycare centers (I’m sure there are many other blogs that cover that in full), let me give you a list of the fiscally responsible things I learned and recommend when going on this journey. That way you can find a center you’re comfortable with both financially and from a care giving perspective.
Moving Somewhere New? Check Out The Local Day Cares!
We bought a home in a town specifically with public schools in mind, but we never thought to investigate day cares before purchasing. In retrospect, this seems extremely shortsighted, as elementary school was six years away, but day care would be needed almost immediately after the baby was born.
Additionally, your town’s elementary school probably provides a bus, but your chosen daycare facility is a place you’ll be driving to twice a day, almost every day, for the next five years!
Advice I wish someone had given us at the time: Check out the local daycare centers prior to moving. I’d strongly recommend making this part of your process if you are moving somewhere with the intention of raising children there.
Dependent Care FSA Fund: Start Contributing Immediately!
If your employer offers this benefit, start taking advantage of it before the baby comes. This benefit allows you to put away up to $5,000 a year tax-free to be used on childcare expenses.
Like most pre-tax accounts, you get the double savings of getting the full amount of the money and not having to pay taxes on it, which results in a savings of roughly $2,000 a year. Additionally, the funds have a three month carry-over into the following year, so even if you have a child born towards the end of the calendar year, you can still utilize the savings in the account.
Check Policies Regarding Time Off
Be sure to investigate the policies surrounding weeks off over the course of the year. Some centers wouldn’t allow any breaks, meaning you had to pay for weeks you and the family plan on taking a trip, or being home around the holidays, while others allowed for up to two weeks per year where dues would be waived and your spot would still be assured. This could be a difference of $250-$1000 a year depending on your weekly daycare costs.
Don’t Put Down A Deposit Until You’re Ready
Surprisingly, a number of these centers treated the enrollment process like a high-pressured car sale, trying to convince my wife and me to provide a deposit as soon as possible, or risk losing our spot.
In fact, we ended up changing day cares unexpectedly a week before our daughter began, and there was still a spot available. I do think we got lucky here; I’m not advocating that you wait that long, but don’t put down any money until you’re comfortable with the center and ready to commit.
Is It All Inclusive?
Day care centers aren’t all inclusive resorts you know. Many have “extras” that you will have to pay for.
As if tuition wasn’t enough, most of the centers we visited had various music, yoga or arts & crafts programs that were separate from the tuition costs and required an additional fee. While some sessions were just a few dollars, others charged up to $150-$200 for a block of activity hours! No, thanks!
I’d recommend taking this into consideration, as you might say right now you won’t pay the extra fee, but how will you feel when Junior is the only kid being left out since you didn’t pony up the extra money for guitar class (or at least this is how the day care centers will try to spin it)? And yes, there is kiddie yoga – I was equally shocked.
Some centers went as far to provide full meals and snacks for the kids once they were toddlers. Surprisingly, this wasn’t at the most expensive facilities we visited but more common at the middle-tiered centers. It’s definitely a nice perk if it’s included.
Do The Rates Change?
The majority of the centers we visited had a rate program that declined as the child got older. This is something to double-check and see if the center you’re looking at offers. Additionally, most had a second-sibling discount, which had a pretty big range (anywhere from 10-25% discount for a second child), which is something to consider when planning for the long-term.
What Are The Rate Increases?
Be sure to ask this question, as some centers increased by up to 10% per year, and when compounded over four or five years—well, that’s just crazy talk!
Money isn’t the only thing to consider of course. We are talking about your kid after all!
You’re paying a lot for day care – where is that money going? Something that impressed us at the facility we settled on was how often they cleaned the toys/floors/etc. Babies stick everything in their mouths, it would be nice if those things weren’t sticky and covered in germs.
Some centers provide streaming cameras in each room that parents could tune into at any point to view their child. This can help provide a lot of peace of mind when leaving your baby in a new place with strangers.
It also made me feel like we were “getting something” for the cost, where as other centers seemed a lot more dilapidated and didn’t have the camera feature (despite charging significantly more).
New York has rules regulating the ratio of care takers to children based on the age of the children and the type of facility. This is a good reason to pick a licensed facility over a more casual arrangement. Even the most loving, dedicated person can only properly take care of so many children at once.
The Best Decision For Your Family
Clearly, choosing a childcare center will be one of the biggest first decisions you make as a new parent. Be sure to allow proper time to explore your options, as ultimately you and your family need to make the best decision overall, with finances being just one aspect, albeit it a very important one. (And if you’re curious, my wife and I chose the $1300/month center.)
Have you had the experience of shopping around for childcare services? Any tips or pointers you’d like to share?