- Life & Money
- Family & Work
- Your Family
- Northwestern Mutual
- Aug 04, 2016
Child Care Costs: Whether Day Care or a Nanny is Right for Your Child
Deciding who will care for your child while you work can be overwhelming. If you don’t have family members to help, you’re likely deciding between a day care center, an in-home day care or a nanny. Balancing the value with the cost of child care can be daunting, but considering the pros and cons of each can help.
DAY CARE CENTER
Day care centers have classrooms staffed by multiple people caring for similar-aged children. Set schedules and policies help things to run smoothly, and centers must meet state-mandated health and safety standards.
“We looked at in-home day cares, too, but ultimately went with a center,” said Paula Voigt of Wheaton, Illinois. “I can see the value of having a 5-year-old with a 3-year-old, but I didn’t want my toddler with school-aged children."
According to Care.com’s 2015 Cost of Care Survey, U.S. day cares cost an average of $188 per week for one child and $341 for two. Some offer sibling discounts, but some do not. Make the most of your investment by using pre-tax dollars, if your company offers dependent care flexible spending accounts (FSA) or by deducting the cost on your tax return.
Choosing a center that serves breakfast, lunch and snacks will decrease your grocery budget and save you time in the morning. On the one hand, centers don’t close very often, making them the most reliable option; however, you may have to still pay for vacation and sick days.
Speaking of sick days, they may happen a lot at first. Most day care centers have strict rules about keeping sick children at home at least 24 hours before they can come back. If your child cannot go to day care, you will need to stay home from work or find backup care.
IN-HOME OR FAMILY DAY CARE
With in-home day care, you’ll bring your child to someone else’s home, where they’ll be with other children. Some in-home day cares are licensed and inspected by the state, but many are not.
Care.com reported that in 2015, in-home day care cost an average of $140 per week for one child and $267 for two, making it the least expensive option. If your provider gives you the necessary information, such as a Social Security Number or tax ID, you may be able to use FSA dollars or deduct the cost from your taxes. Like day care centers, some in-home day cares provide food.
Some are flexible, letting families take days off without paying or changing their schedule as needed. They also offer a home-like, family environment.
“I felt like I knew who would be with my son,” said Adrienne Bradley, of Winfield, Illinois, who used an in-home day care for four years. “I was worried that in a center there could be high turnover and lots of changes.”
When you choose an individual provider versus a center, you’ll need a backup plan, or several, for when they aren’t available, as well as for when your child is sick.
Your caregiver will become very special to your family, so you want to be sure it’s a good fit.
If you want one-on-one care for your child, you may want a nanny to come to your home. According to Care.com, in 2015 nannies cost an average of $477 per week for one child and $488 per week for two, making this the most expensive option for small families, but a potentially more economical choice for larger ones.
Similar to in-home day care, you can use pre-tax money or deduct the cost from your taxes if your nanny gives you the necessary information. According to the IRS, nannies are employees, not independent contractors, so you will likely be responsible for employment taxes, Social Security and other costs. You may also need to provide food and pay additional costs, as Voigt discovered when she had a nanny.
“We paid time and a half for anything over 42 hours per week,” she said. “She took the kids out every day, and we would pay her mileage because she drove her own car, plus admission if they went somewhere that charged it. It really started to add up.”
Having a nanny may be a great option if you have an inconsistent schedule. Some are even willing to do housework, work overnights and travel. This, of course, comes with a price, as some nannies charge premium rates for special circumstances. But if you pay your nanny a little extra to do chores while the kids nap, go to school or do their homework, it may cost less than hiring someone else to do them and it will save you the time and energy of doing them yourself.
HOW DO YOU CHOOSE?
Finances will play a key role in your decision; however, there is value beyond the price tag.
“Price was a factor, but it wasn’t the only factor,” Bradley said. “We wanted to see what we were getting for the price and if it was worth it.”
Consider all the options within your budget and think about what qualities matter most to you. Your caregiver will become very special to your family, so you want to be sure it’s a good fit, both in terms of logistics and personality.
“It comes down to the vibe you get,” Voigt said. “Your gut will tell you everything if you listen to it.”
This publication is not intended as legal or tax advice. Taxpayers should seek advice based on their particular circumstances from an independent tax advisor.
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