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 Childcare.gov 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.
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.
(Learn more: Personal Loan Calculator)
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.
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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25 ways to save money fast
The secret to sticking to any goal is to remember your “why.” What made you want to save money in the first place? Dig deep to find the emotions underlying your reason.
For example, let’s say that when you were growing up, your parents always worried about money and argued about it. Now, as an adult, you don’t want your kids to witness the same thing. That’s pretty powerful. And those memories can come in handy the next time you’re tempted to buy something you don’t need.
Your reason may not be so dramatic, and it doesn’t have to be. Instead, maybe you’ve never traveled outside the country and you’d love to do so in a year or two. When financial temptations arise, you can remind yourself of that big trip. Even better, picture yourself walking over an ancient bridge in Venice, or hiking the rainforests of Costa Rica, or sitting at a sushi bar in Tokyo. Whatever pulls your heartstrings is your key to saving money.
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Creating a budget is one of the most crucial steps to saving money. If you don’t have a budget, you can spend hundreds of dollars more per month than necessary.
It can be difficult to even identify excess spending without a budget. There are many popular budgeting methods to help you get your spending under control.
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Once you set a budget, consider tracking your spending. Just being mindful of your purchases makes cutting back almost automatic. (The same phenomenon helps people who track their eating make healthier choices.)
Many popular budgeting apps can help you track spending every week. Because you already have a budget, you will know much you can afford to spend weekly. If your expenses exceed that amount, you must make some adjustments.
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While reducing your housing costs is not feasible for everyone, it can be a quick way to save a significant amount of money. Moving to a smaller house or apartment, or adding a roommate, can allow you to slash your rent or mortgage. Another option is house hacking, or renting extra rooms in your home and using the money to pay your mortgage.
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If you’re good at driving a hard bargain, you can try to negotiate your utility bills. Whether it’s your electricity, cable TV, cell phone, or internet, ask for a lower rate. If all else fails, you may be able to switch providers. (And by the way, mentioning you might switch is a great negotiating tactic.)
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There are many ways to reduce food costs, from cooking at home to meal prep. Cutting one or two of your typical lunches per week can lead to significant savings.
Cooking meals at home can seem more expensive at first if you’re not stocked up on things like spices and baking powder. But it is cheaper over time, especially if you have a large family.
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Automation is a simple way to beef up your savings. Not only is automating convenient, but you might eventually forget you have an automatic transfer every month. Since you won’t have to think about the money as you move it, you’ll be less tempted to spend it on something else.
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Subscriptions are everywhere these days. While it’s understandable that companies want recurring revenue, all those subscriptions can add up quickly. Many apps will help you find unused subscriptions and even help cancel them.
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Refinancing your student loans can save you a lot of money, depending on your situation. For example, if you have private student loans with high interest rates, refinancing might result in a lower rate, especially if you have a strong credit history.
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Refinancing your mortgage can be a good move, especially if interest rates are lower now than when you bought your house. If rates have indeed fallen, you might be able to knock two or three percent from your mortgage APR. And a lower APR can save you thousands over the long term.
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Some premium credit cards have numerous benefits, such as airport lounge access and rental car insurance. However, these cards can also have high annual fees. If you aren’t using the card enough to justify the fee, consider downgrading to a no-annual-fee card. This way, your credit history from the card stays intact while eliminating the yearly charge.
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There is no limit to the number of ways we can spend our money. And while it’s nice to buy something from your “want” list now and then, feelings change. There might be something you desperately want at one moment, but after a few days, your interest has waned. You can avoid buyer’s remorse by delaying purchases by a few days or weeks.
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Used items are often much cheaper than new ones. Everything from clothing to electronics can be used, and are often in near-perfect condition. There are many places to find used items, such as thrift stores and Facebook groups.
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Banking fees may not seem like much, but that $20 per month service charge doesn’t make sense when so many banks these days charge no monthly fees. Both traditional and online banks offer checking and savings accounts with no monthly fees. They typically advertise their lack of monthly and service fees, too, so they’re easy to find.
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People often think of credit cards as a convenience, but they can also help you save money. The best cash-back credit cards let you earn a percentage of every purchase in money back. If you strategically use a cash-back card only on things you would have bought anyway, you can make your money go further.
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Another way to control your spending is to have a no-spend day once per month. It’s as simple as it sounds: You must go an entire day without spending a penny. That means you can only eat food you already have on hand. If you go out, you should limit yourself to free activities, such as hiking or complimentary-admission days at museums.
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One way to save money fast is to open a savings account with a high-yield interest rate. Traditional banks might pay interest on checking accounts but usually no more than a few pennies per year. High-yield savings accounts tend to be much better, paying many times more interest than traditional banks. These banks are usually online and don’t have physical branches, but that might be okay if you only have a savings account.
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These days, it’s remarkable how much you can learn to do just by watching a YouTube video. It’s likely still worth it to hire a professional for some things, such as major plumbing or electrical repairs. But for basic jobs, do-it-yourself (DIY) can be a great way to save money quickly.
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Like automating savings, automating your bill payments can have benefits that go beyond convenience. For example, paying your bills automatically every month means you won’t ever forget to pay. Hence, you don’t have to worry about the possibility of late fees.
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Car insurance can be quite expensive depending on your situation, but it’s possible to cut back. For instance, there is likely no need to have full coverage on a 15-year-old car worth only $2,000. Or if your car is in good shape, maybe you can do without the roadside assistance option for a year.
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Even if you have a newer car and need full coverage, you still might be able to lower your car insurance premium. Try shopping around with different providers and asking for quotes. Each insurance carrier has its own way of calculating premiums, so they might all give you slightly different rates.
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High-interest debt can wreak havoc on just about anyone’s budget. The most common offender is credit card debt. However, there are other possibilities, such as payday loans and personal loans. If you have any debt with at least a double-digit APR, it’s a good idea to prioritize repaying it as soon as possible.
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When it comes to grocery shopping and meals, planning can make a big difference in cost. For example, by checking your freezer and pantry inventory before you go, you’ll avoid buying duplicates of things you already have on hand (hello, three cans of baking powder!). You’re also less likely to buy items you don’t need, or to get too much of an ingredient that you end up throwing away.
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Insurance providers often have multiple types of insurance plans, such as home, auto, and boat insurance. Because they want you to insure more of your assets with them, they will often give you a discount for bundling two or three types of insurance together. However, be sure the provider offers competitive rates before you bundle.
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Like the previous point, many entertainment companies will let you bundle plans to save money. For example, if you pay for streaming services, you can bundle multiple apps (sports + kids’ channels, for instance) to save money.
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People tend to prefer name-brand items. Nevertheless, store-brand items (aka generics) are often similar or identical to the name brand. While you might occasionally find that the store brand isn’t always as good, paying for the label is usually not worth the money.
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- Because online banks don’t have the overhead costs that brick-and-mortar banks have, they may offer a higher savings account interest rate. Just keep an eye out for minimum balance requirements and monthly fees.
- To get into the savings habit, consider having 10% of your paycheck directly deposited into your savings account. Or, set up a small automatic recurring transfer from your checking account into your savings account on the same day each month.
- To set up a simple monthly spending budget, consider the 50/30/20 rule. This involves splitting your after-tax income into three categories of spending: 50% on needs, 30% on wants, and 20% on savings.
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Just as there are many ways to spend our money, there are many ways to save. And saving money even on little things can have a big impact in the long run. First make a budget and track your spending. Review your insurance coverage, subscriptions, and banking fees for easy ways to save. Meanwhile, when you’re out shopping and tempted to spend more than you need to, keep your “why” in mind. That is, the emotional reason you wanted to save in the first place.
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This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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