Budgeting for Childcare

Childcare is not cheap. Right behind a mortgage, student loans are often said to be the largest source of consumer debt. However, the average annual cost of full-time childcare is higher than the average cost of in-state college tuition. Whether you aspire to have children in the future or have already started a family, factoring childcare into your budget can help you avoid piling up debt. Here are some steps that can help:

Educate Yourself on Care Costs

Whether you’re looking into a day care center, a nanny, or you’re even considering being a stay-at-home parent, you should have sense of how much childcare will cost you every month. Do some research and reach out to any care options that are of interest to you. Make sure that you know exactly what the price will be, so that you can factor in the expense when you start putting together your budget. If your yearly salary is at all comparable to the cost of your child’s care, you might even consider leaving work to stay at home. If the cost of a nanny exceeds your budget, explore nanny-sharing. You can split the costs of care with another family and know that your little one will have a friend to socialize with. And possible, accept help from friends and family if they offer. Not only will you be saving money, but you’ll know your child is in good hands.

Track Your Current Spending

Start tracking where all your money is going now – before kids. You can either keep track using good old’ pen and paper or use a free app. Tracking your spending and comparing it to your income can give you an idea of how much you’ll be able to spend on childcare. If you discover that you won’t be able to spend much, it might be time to start looking into a higher-paying job or cutting some spending, which is a perfect segue to the next step.

Find Places to Cut Spending

The great part about tracking your spending is that you have a clear understanding of where your money is going. Look at all of your discretionary spending to see where you can start making cuts. It might be time to finally cut your cable, brew at home rather than stopping for coffee every day, and carpool to save on gas. You don’t want to be borrowing money from your emergency fund or contributing less to your 401(k).

Monitor Changes Over Time

Stay open to the idea that the costs associated with having children will change over time. While your salary may increase, so might the cost at the day care center. You might have another child, doubling the cost of the care. Childcare costs vary by age, with infants being the most expensive. Your child will someday grow old enough that paying for childcare is no longer necessary. Instead of childcare, you might have to fund their activities and interests. Don’t get caught sticking to the same outdated budget. Make sure that you’re sitting down and evaluating your budget every year to stay on track.

Happy parenting!

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