A couple of months ago on Corporette, we discussed how much you should spend on housing costs, and today we’re going to talk about something that often looms just as large in the minds of working moms: the cost of daycare. Lately, the news seems to be full of articles about the cost of daycare (e.g., “U.S. Parents Are Sweating And Hustling To Pay For Child Care,” NPR), so we thought this would be a great time for a discussion. How much are you spending on daycare? Is the cost of daycare more than you expected?
For a quick review, the recent Corporette post covered the 50/20/30 rule for budgeting, which recommends that you spend no more than 50% of your take-home pay on fixed costs, use at least 20% for saving money and reaching your financial goals, and spend no more than 30% of flexible costs. How does the cost of daycare fit into the ratio? In the comments on the post, several readers shared their childcare numbers, and their responses ranged from 10% of their take-home pay to 30% (for a child with special needs). The average childcare spending among readers who shared information was about 18%.
The Care.com 2016 Cost of Care survey found some striking statistics:
- “54% of families said they spend more than 10% of their household income on child care — and 1 in 5 said they spend a quarter of their income or more.”
- “21% of respondents say they’ve waited to have children specifically because of child care costs. This statistic increases to 26% for millennial parents.”
- “More parents (74%) are budgeting for child care costs — 92% of them even started budgeting while they were pregnant!”
Signing up for a dependent care flexible spending account through your employer can help a bit. Here’s the simplified version: Each year, a household can contribute up to ,000 to a dependent care FSA for daycare, after-school programs, and summer day camps (not sleep-away camps) in order to pay with pre-tax dollars. You need to submit claim forms to be reimbursed for all of the funds by the end of the plan year or you lose anything left in the account.
What is the cost of daycare for your family, either as a dollar amount or percentage of gross or take-home pay? Do you have a dependent care FSA? How much was cost a factor in your choice of childcare: nanny, au pair, home-based daycare, daycare facility, family members, etc.? How has it affected your job or career decisions?
- 5 Steps to Create a Child Care Budget [Care.com]
- Don’t Forget to Budget for Childcare [Parenting]
- Choosing Child Care: What New Parents Should Know [NerdWallet]
- Daycare Costs — 9 Ways to Save Money on Childcare Services [Money Crashers]
- The Ins and Outs of the Child and Dependent Care Tax Credit [Turbotax/Intuit]
- Filing Tax Form 2441: Child and Dependent Care Expenses [Turbotax/Intuit]
In DC says
Two kids, childcare is about $5500 a month in DC. This includes full day daycare/preschool for both kids, some extracurricular activities like dance and soccer that are extra at the school, and a part time babysitter who helps us 2 hours every evening. This amounts to 14% of our household income (before taxes).
We never did the nanny route, we liked the accountability and increased socialization with daycare.
It’s astonishingly pricey but I keep telling myself that the kids will be in public school soon enough, at which point we can put this $5500 into our savings account every month instead.
Navy Attorney says
Holy crap! I pay $900/mo for baby in daycare, and $1200/mo for preschool. Both full day, both include food. I’m in Falls Church.
Due in December says
$480 a week (DC), which averages to $2,080/month, for daycare for one infant. Our rent is only a couple hundred dollars more than that. Daycare costs are a bit over 25% of our take-home.
Taking student loans, car payments, rent, utilities, and daycare into account, I’d say we spend a bit over 75% of take-home on fixed costs. Since having a baby, we’ve basically stopped saving, and have cut our retirement contributions in half (I max out, DH does only 1-2% to get the company match).
We are moving this month. The cost of living won’t be significantly cheaper in most respects, BUT I hope to save at least $800 a month on daycare costs. That will go straight into savings.
$810 a month at a church daycare in LCOL City in Southeast. This is for the toddler room with a 2 teacher – 8 student ratio. The infant room was $860 a month and had 3 teachers. Includes all lunches.
We max out the dependent care FSA and wish we could do more. Cost seemed pretty standard for the nicer daycares in our area. We’re very lucky that we both have good jobs and this is under 10% of our take home. Seems crazy to even say that. Can’t wait for public school!
CPA Lady says
Yup. Same type of daycare, same living situation. $830 a month.
Boston Legal Eagle says
I did the costs for the year – we pay about 20% of our take home for daycare (this is just salary, does not include bonuses/equity). In HCOL city as you can tell from my name. Daycare is less than our rent but is still over $2000 per month. Rates go down as the kids get older but for 2 I would imagine we’d be paying close to $3500 per month if we stick with full time 5 days a week. We may have the option of a grandparent a few times a week for at least 1 in the future, so hopefully costs would be less.
I live in Wisconsin and pay about $3500 a month for two kids in day care. It gradually decreases as they get older. I’m not sure what this is relative to our income, but it’s about the same as our mortgage.
Two Cents says
We pay more than that, but we’re in DC. I’m very surprised that childcare would be that costly in Wisconsin. Wow.
Well, it’s in the “blue” part of Wisconsin in Madison, and it’s hard to find infant care for much less than 1800 a month at the great places. I would imagine in the more rural areas it is a third or less of this.
LA, one kid. Daycare was $1800 per month at a center. Preschool was $3k. (We could have gone to one that was about $2k, but the more expensive one was much more convenient and otherwise a better fit.). Both from 7-6.
LA too says
LA – one infant, large corporate center for 3 days a week = $1040/month. Center includes diapers and meals. 5 days a week would have been $1400/month.
Also in LA.
$1100/ month for an in-home licensed daycare for 2 yo (no diapers, no meals, no milk, nothing else included). 4-6 kids, 1 caregiver.
$1000/month for Montessori preschool for 4 yo. Lunch included. Not the least expensive, but not the most.
Both are from 7-6.
I’m excited for public school, but I also know that we are going to be paying for before and after care so I’m not sure how much the true cost savings will actually be…
Seventh Sister says
My kids are now both in LA-area public school, and our costs are around $800/mo. all in for aftercare. That includes one day a week where a sitter picks them up and takes one to a dance lesson. It’s not nothing, but it’s a lot less than the $2600 or so we paid when they were both in very good full-time care. I don’t feel like I’m walking around with wads of cash in my pockets, but I don’t have to spend such a huge chunk on daycare every month.
100$/day for my 3 months old in San Francisco. It’s a home day care with only 2 babies at the moment. With rent we’re probably at about 50% of our take home (including maxing 401K). That said, we’ve never been saving so much since having a baby due to the lack of traveling and other frivolous expenses.
$239/week for a toddler in Fort Worth, TX. We work for a large company, and get a 10% discount on top of that. That’s less than 5% of our gross pay.
Holy cow. I’ve never looked at the numbers in black and white like that. Its a good daycare, NAYEC accredited, and the cost is comparable to other daycares in the area.
$1835/month, close-in DC suburbs. Small (but not in-home) center, not NAEYC accredited but full of loving caregivers.
Nebraska – Daycare is just over $1100 a month for one infant, which is around 14% of our take home pay.
Anon in NOVA says
Mine is in public school (yay!) but I’m in a field where the school system offered before/after care won’t cut it (they close for snow days too frequently). We use a local daycare for before/after school care (they take the kids to/from school) and this is $214/week. I will say, this is more than I was expecting! >$800/month for a couple of hours a day feels a little ridiculous. It was a letdown after all the years of “public school will help so much!” Summer day camp usually runs around $1500-$2000/month. Every little bit helps, but public school wasn’t as much of a break as initially hoped.
Anon in NOVA says
PS i’m so glad this was the topic today. I’ve been wanting to ask people recently but didn’t want to seem rude! I’m really interested to hear what those with nannies pay…
DC Daycare says
$2150 for 2 kids in DC, which represents about 12% of our gross or about 22% of take home. But with our fixed costs, including high student loan payments, our fixed costs are 65% of our take home.
just Karen says
Low cost of living city in the middle of the country, I pay $900 a month for our 2 year old in a day care center that we love. This is about 10% of our before-tax income in theory, but since my income is erratic it feels like significantly more
$330/week in Portland, Oregon for one kid. That’s about 15% of our take-home pay, but take-home also reflects 13% of gross pay contributed to retirement accounts. My company has a VERY generous matching policy (50% of all employee contributions, with no cap), so I am trying to max my 401k contributions this year. My husband is just contributing 12% of his salary to his 401k, but won’t be close to maxing.
We end up spending about 65% on fixed costs (mortgage, utilities, student loan payments, car payment, daycare). The rest goes to food, clothing, gifts, charity, emergencies, and a very small amount to monthly savings, which is typically and routinely used for recurring large expenses (vacations to visit extended family, house maintenance, car insurance, etc.). We’re stretched pretty thin, and I can’t imagine how we’d absorb the cost of daycare for a second child, unless we drastically cut our retirement savings.
$600/wk (or $2600/month) on daycare for two kids in a suburb of Chicago. Roughly 15% of our gross pay. We use the FSA, but obviously blow through that by Feb. That 15% was basically our non-retirement savings, so we’re not saving anything extra right now.
I worry about public school not actually being that cheap. We’ll have to do before/after care, plus cover all the non-school days, plus summers. I’m not sure the savings relative to now will be that great. It’s depressing.
(Our local schools are closed all next week. Neither of us can take vacation on Mon/Tues. Luckily daycare is still open, but I have NO IDEA what I will do when first grade rolls around. Hopefully I can make friends with local SAHMs who would be willing to adopt my kids on non-school days? Or pay $60/day/kid for the local park district program, maybe. I don’t know.
Anon in NOVA says
I posted about the public school thing in my response above. It was a huge bummer (for lack of a better word) when I realized it’s still sooooo expensive. Over $800/month for before/after school care, and summers are between 1500-2000 a month. The before/after school care offered by the school system is a couple hundred a month cheaper, but it closes when the schools close for snow, and we needed something that covered all of those school holidays!
In Chicago too but in the city – I really would love to do public school for political/exposure reasons but am starting to lean toward private just because many private options include after school care and even summer school as part of or an add on to tuition – it would be so nice not to have to to think about that or try to coordinate after school care. I’ve heard the park district stuff fills up three minutes after online registration opens or something insane like that. We have two years to figure it out. Sigh.
Currently paying $430 ever two weeks for toddler – so $215 a week. Will soon be adding infant to that ($225 a week) to up us to $880 every two weeks for a toddler and an infant – and that is with the veteran discount. MCOL city in the Northeastern US. I am really really glad baby number 2 will start daycare at about the same time that my (massive) law school loan is finally paid off but very sad that it will essentially cancel out the savings from that no longer existing. Daycare will be just under 20% of our take home pay. So excited for public school in a few years.
NYC, but outer outer borough (might as well be the suburbs). I go in early and come home early and husband goes in late and comes home late. Yet there are no daycares in my neighborhood that offer hours late enough for me to make pick up, given my commute. I still work less than anyone else in my office and my career is suffering for it. Meanwhile, nanny on the books is $4k a month. Daycares close to my office cost almost as much ($3-3.5k) and would require commuting with the toddler. There is no winning here.
Nanny share? Or day care + college babysitter?
Our preschool (Bay Area, child-care center run by large company) is $1,700/month, which DH’s company subsidizes 30%. (Rates just increased to $1,900 for new students and $2,400 for infants). We also pay ~$35,000/year for a 30 hr/week nanny to pick up our older two from school (~$27/hr, which goes to an agency that handles all payments and includes payroll taxes/workers comp etc.) and ferry them around. Our elementary school has aftercare for $500/month, with a 15% discount for siblings, which is a steal compared to the nanny, but the nanny really makes our lives so much easier. We will also pay for camp in the summer, at least part-day (since we only have 30 hours coverage with the nanny), and I expect that to cost around $5,500 for the two older kids for the summer, maybe more.
If you like it, would you please share the name of your agency?
College Nannies and Tutors. They are national, but franchised. They primarily hire college students (a lot of them in my area attend local community colleges or college online), but can also recruit full-time nannies. I’ve been happy with them generally, although both of my nanny searches took longer than I expected.
We will be paying $1350 a month for a center in the far DC suburbs (eastern Loudoun) for an infant. The center is subsidized by husband’s employer (it would otherwise be $1900). The amount is roughly 15% of our total pay.
I have no clue what we’d be doing if we didn’t have this option. A lot of my friends send their kids to an in-home provider.
feeling the squeeze says
DC MD Suburbs here. We pay $250/week for an inhome daycare for our 1.5 year old. at $13,000/year it’s a little less than 10% of our income.
We started looking into preschools for when he’s 2. For full day at a great program, we’re looking at $20,000 or more a year. So he’ll stay at his in home day care until he’s 3, or we move.
NYC, large center, 2,600/mo, full-time care. It’s about 20-25% of our take home, which means we don’t save beyond 401k contributions. Trying to move to a less expensive center. Rent is about 33% of our take home.
I’m curious where my city ranks. What are the thresholds for LCOL, MCOL, and HCOL?
Two Cents says
This is how I see it:
HCOL – SF (and Bay Area generally), NY, Boston, DC, Los Angeles
MCOL – Philly, Miami, and generally large cities that are not those listed above
LCOL – everywhere else
Alexandria VA says
just under $1800 per month for a 18 month old at a daycare.
We’ve used 2:
Infant daycare, 3:1/7:2 ratio, open 7-6:30. BYO diapers, wipes & food. $2000/mo.
Infant daycare, 3:1/7:2, open 8:30-6, BYO diapers & lunch but snacks & wipes provided. $1650/mo. Toddler rate $1400/mo.
In the time we’ve used daycare our gross (pre tax, pre retirement) income has ranged fro $190k to $360k. Mortgage has been $2100-$3600.
$240 / week for a toddler in a room with 15-18 kids (some are not full time) and 3 teachers. It was $270 / week for younger toddler and $330 / week for infant care. Large center, meals included.
Once he starts school in Sept. 2019 (not that I’m counting the days … ) it will $65 / week for aftercare at his school.
Our mortgage (Twin Cities) is slightly more than the cost of f/t infant care for one. When we were originally looking for infant care several years ago, some centers in town were $500+ / week. Our center is not fancy but very well run, and little TK’s classmates are from all walks of life / types of families as many are there are some sort of assistance / subsidy.
Extra bonus: His center does full day school-age care during the summers, with the same hours (630 am to 6 pm). $205 / week. So I won’t need to go crazy signing him up for weeks of camps with different start / stop times, locations, etc.
$3500 for a preschooler and toddler in the close-in DC suburbs. About 12% of our take-home pay.
I think our school is on the expensive side, but most of the money goes directly to salary and benefits for the teachers. I know it’s easier to say when you make big-law money, but I can stomach the higher cost when I know my kids’ teachers are paid a decent wage, get benefits, and don’t have to come to school when they are sick.
DC Nannyshare says
We share a nanny with one other family and pay about $2000/month for our toddler. It is more expensive than day care, but not by that much. Plus, we didn’t have a choice because we couldn’t get into any of the 7 daycare centers in DC that we were on the waitlist for. It’s about 16% of our after-taxes income.
$1400 a month for full time daycare for two kids. Our state’s public schools are in terrible shape, so we “have” to go private and it will go up from there (by a lot)! Jealous of you who have great public options!!
Outlying neighborhood of Philadelphia (so… MCOL?), paying $1695/month for 4 days/week for a preschooler and toddler in a neighborhood center, which is a little over 30% of our take home pay and significantly more than our rent. Would be $1843/month for a full 5 day week. The center is nothing fancy but run by really wonderful staff and they do a lot with the kids. And it is something like 40-50% cheaper than the fancier center city places, so we have really lucked out on all levels.
In Philly $240/wk for 4 year old. Additional infant will add approx $300 more per week. These are low for the area and level of care (food is provided, NAEYC accredited, open 7-6). With one kid I’d estimate its close to 10% of take home (post tax but not including deductions for insurance and retirement contributions). With two kids it will be closer to 20%. Public school won’t save us that much $ bc after care will likely run $150-200 per week and then we will have to pay for summer camp/care. Due to winter birthday older child can’t start kindergarten until 2018 anyway.
tax question? says
Dumb finances question- I’ve never used the FSA for childcare, because it maxes out at such a small portion. If I use the FSA, do I still get to claim the rest of the costs that weren’t covered when it comes to tax time??
CPA Lady says
1. You should definitely use the FSA. It reduces your taxable income by $5,000 per year. That may be a drop in the bucket for you, but it’s still something. I always max mine out.
2. Yes you can claim the rest. Examples:
-You have 1 kid. You spend $10k on daycare. You put 5k in your FSA. Of the remaining 5k, you can use $3k of expenses to calculate the credit (the credit is a portion of that 3k, up to 35%, based on your incomes, which might actually phase you out of the entire thing anyway)
-You have 2 kids. You spend 20k on daycare. You put 5k in your FSA. Of the remaining 15k, you can use 6k of expenses to calculate the credit.
Basically it just doesn’t end up being that great of a credit considering how terribly expensive childcare is.
tax question? says
Good to know- thanks!
Navy Attorney says
Income phases us out enough that’s it’s only a $200 tax credit, so I don’t bother with the FSA. I’m only middle-income, but am in DC. Do the math before doing the paperwork!!
MCOL city in the south. #1 goes to a regional chain daycare and we pay $980/mo in the pre-K room. That is subsidized by my company so we only pay half ($490/mo). #2 is in onsite daycare at my office and we pay around $400/mo for that awesomeness. So basically i will never even consider leaving my job until both kids are in elementary school.
$1400 for an infant in the DC suburbs (NoVa). BYO diapers, bottles, food, sheets, etc.
S Midwest says
Minneapolis here — we pay around $3200 for a pre-schooler and a 15-month old. Full-time M-F. Includes all lunches, and some “add-ons” for the older one (soccer, field trips, etc.)
We pay $1950 a month in a midsized New England city for one kid in infant/toddler care. That’s more than our mortgage and 17% of our gross income. That is significantly more expensive than if we were willing to drive kid to the suburbs (there, it’s probably around $1200 a month.) But we work downtown and there are few in-town options.
In Toronto (Officially in the city but a former suburb) currently paying a nanny $15/hour. However, we will soon be switching to a daycare. Not-for-profit daycares are not uncommon to find. Ours is a co-operative and will be about $1200/month. They only start taking kids at 18 months. Hours are 7-6, food is provided. We are very fortunate for the option. Toronto is otherwise a very HCOL city- average price for a detached home is now over $1 million.
In Chicago – pay about $3000/month total for 2 toddlers in a technically home-based daycare, but run more like a little center or school and we LOVE it! It’s twice what we pay for our (admittedly very reasonable) mortgage. It’s about 25% of our take home pay, but almost exactly equal to what my husband’s take home pay is.
In 2017 we’ll pay about $4500/month for 3 kids (middle one is moving out of the 3:1 classes and tuition gets significantly cheaper. Yay!). Maryland side of close-in DC suburbs in a nonprofit center, hours are 7-6, food is included, cost reflects a sibling discount. count me among those parents in the first statistic; we spend almost 20% of our salaries (not including bonuses) on childcare.
I wouldn’t say it’s substantially impacted our career decisions, since we’re fortunate to have well-paying jobs with good work-life balance (I did cut back to part time temporarily after baby #2, but am now full time again in a more flexible office). Cost isn’t the biggest issue for us in choosing our childcare, either. I’m sure we could have a nanny or host a share for less, but we really love our center and think the social environment there is good for our older kids. Also, as I’ve mentioned here before, we did not have a good experience with our nanny a couple years back. Childcare cost definitely does influence the size of our family, though. Not the sole determining factor, but probably the tipping point in favor of stopping at 3.
It’s a depressingly large chunk of money, and the dependent care FSA doesn’t make much of a dent.
I have an 18 month old in a corporate daycare 3 days a week (MIL watches him the other 2 days). $1424 a month, meals and snacks included. In a few months I’ll also have an infant in a similar center down the road, about $1800 month. So around $3200/month for two kids, Boston suburbs so definitely HCOL area. Our daycare costs will be about 35% of my husband and my take home pay, which is frightening to type out, but we’ve somehow managed to fit it into our budget. We’re really happy with the care and education our son is getting, so it’s worth it to us.
We have done every childcare arrangement out there (day care, in home care, nanny and au pair). Our current set-up is an au pair plus preschool. The out-of-pocket for the au pair is about 1600 per month, but that does not include the increase in car insurance, gas, extra cell phone, food, etc. Preschool is 415 per month for three mornings per week. Before our au pair, we had a full-time nanny and paid about 3000 per month for her, which included the fees paid to the agency to take care of taxes, taxes and the overtime for hours in excess of 40. We are in New England.
I am in a LCOL city in the Southeast. We pay $950 per month for one infant. The prices decrease, but not by much, as a child’s age increases.
I am terrified of the costs of summer camps, etc. when our little one starts school.
We live in Western Wisconsin but basically a suburb of MPLS/St. Paul. H and I both commute to the Twin Cities for work. We pay about $2,800/month for an infant and 4-year-old in a full-time center, part-time church preschool for the 4-year old 2 mornings a week, and before/after school care for our kindergartener. It was about 20% of our take home pay last year before a recent career change. This doesn’t include add-ons like soccer at daycare or school release/snow days for our kindergartener, or summer camps for her. It seems like our school district has early release or late start at least twice a month and a random day off a month, and those days are about $45 each at the school age care program.
We’re paying full-time daycare plus the part-time private preschool for our just-turned-4 year old because our district is one of less than 10 in our state without a 4k program. The only way to get a shot at one of the coveted all-day pre-k programs at our NAYCE-accredited church preschool is to be a “currently enrolled family” to get a one-hour jump on enrollment. So, we’re paying extra this year and running around like crazy just to give her an advantage by being in the part-time program this year. I can’t wait for the Black Friday-style enrollment day, which is of course held in the dead of winter. I’ve heard I have to get there by 5am just to have a chance. The things we do for our kids…
Chicago – $1500/month for a 2 year in the city. Was $2000 until he was two. We have #2 coming in March so starting in May we are looking at about $3500 month (10% second child discount plus increased tuition since #1 was an infant = wash) for two.
St. Louis–$840 a month for a 3-year-old. When she was an infant, it was $1,160 a month; when she was a toddler, it was a little less than $1,000. Our mortgage is just over $1,000 so as you can see, daycare has cost us both more than our mortgage and almost as much now. The upside is that the daycare/preschool is amazing. Still, hoping to get her into a free public school pre-K next year. We’ll still, of course, have to pay for after school care/summer camp, but that will be peanuts compared to what we pay now.
Anchorage, AK. We pay around $1,200/mo for 2 kids in a full-time military daycare. The center has a sliding scale for cost, but we pay the highest rate given our incomes. Center is open M-F 6-5:30 and provides all meals and formula. By comparison, our mortgage is around $1,600. We’ll be looking at charter schools or public schools when the time comes, and I may reduce my hours to be home in the afternoon. I can work from home, but am uncertain how much I’d actually get done with the kids there.
I did look into in-town daycares, but they cost a lot more and had less convenient hours. My husband works on base and can easily do drop off and pick up when he’s not traveling. When he’s gone (like now), I suffer a bit handling all transportation alone, plus work and house care. I do not have any family near by to help.
Anchorage Anon says
Wow! The difference between military daycare and non-military is staggering.
I’m in Anchorage with one kiddo and have used a stay-at-home mom ($900/mo from 3 mo – 1 yr; 1+ yr @ 1200/mo) and a (slightly upscale?) daycare at $1100/mo for toddlers. The daycare we are at now has good hours, 7 am – 5:30 pm; we provide lunch but they do all snacks.
Amazing to hear you get half of that.
Megan V. says
1.5 hours north of Seattle, we pay about 12% of our gross pay in childcare for three kids age 4 and under in full time care. This amounts to about 20% of our take-home pay.
I will have baby #4 in April, so my MIL is moving to our town to live in our rental house and care for our kids in our home. I will pay her $1000 a month on top of covering her housing costs. This will keep us at about the same monthly cost despite adding another child. I am so hopeful that it will work out.
I live and work in central MO. I pay $500 a month in childcare costs for my daughter.
In Idaho I pay $400/month for daycare
In Seattle daycare would be about $2k per month for our 1 year old and $1,500 per month for our 3 year old, so instead we have a nanny for $20 per hour ($800 per week) which is basically the same per month ($3,500 with taxes and such). Now we are expecting twins??