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4 Tips on Lowering Childcare Costs

childcare costsRaising children is expensive — and the cost of raising a child is climbing higher. A baby born in 2013 to an average middle-income family will cost $245,000 to raise to his or her 18th birthday, according to the U.S. Department of Agriculture.

That’s an increase of 2 percent, or $4,260, over the previous year, indicating that costs associated with childrearing are rising faster than the rate of inflation. (Inflation rose by 1.5 percent between 2012 and 2013, the most recent year for which there’s complete data, according to the Westegg Inflation Calculator.) And let me clarify: that $245,000 price tag excludes the cost of college (which could add another $50,000+ to the bill, expressed in today’s dollars).

How on earth do we reach that quarter-million price point? Nearly half is consumed by housing and transportation: your child will need a bedroom, which means you’ll need (or want) to move from a one-bedroom home into a two- or three-bedroom home. You may be able to share a room with the baby when he’s a newborn, but you’ll eventually want him to have his own room (or share a room with siblings).

Child care is the second biggest line-item on the list, coming in at about $44,000. For some families, the monthly cost of childcare is almost as high as their mortgage. It’s not uncommon for families to pay $1,500 to $2,000 per month for childcare, especially when children are very young.

While I can’t offer any advice to help you maintain a one-bedroom home after the kids are born, I can offer a few pointers to tackle the second-biggest component of those expenses. Here are a few ways to lower childcare costs:

1) Move closer to grandma and grandpa

Move closer to family if possible — even if it means accepting a slight pay cut at work — if this significantly reduces childcare costs. But be cautious: while a short-term paycut is fine, don’t accept a job that has diminished or limited growth potential. That’s robbing from your future to save a few dollars in the present.

2) “Barter” childcare services

Barter with friends and neighbors. Since childcare costs can be astronomical, ask your neighbor, for example, if they can watch your child after school from 3 pm until 5:30 pm when you arrive home. In return, you’ll watch their children every Friday and Saturday night, so that they can enjoy some adults-only time.

3) Compare prices

Don’t assume that daycare is cheaper than hiring a live-in nanny or au pair, especially if you have more than one child. Sometimes, live-in childcare can actually result in cost savings, particularly if your childcare provider lives in your home. Nannies and au pairs will often accept a lower salary because you’re providing housing and utilities.

4) Look for flex time

Ask your employer if you can work from home one day per week. Produce your best results on that day, and after three to six months, ask your employer to extend this to two days per week.

The ability to work-from-home will dramatically increase your flexibility, which means you’re more likely to be the person who can pick up the children if they get sick at school (rather than needing to call a babysitter to arrange a pickup).

Don’t assume you’ll be able to focus on work while your children are at home. Even if you work from home, arrange for your children to be watched by a babysitter, or participate in a sports league, so you can have a few hours of quiet concentration. Use this time to bolster your performance at work — so that you’ll have more negotiating power.

Do you have children? How do you keep childcare costs at a minimum?

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My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. I have worked from home several times in 2014. I think this is the best way to have some time to look after your children and spare some money.

    • @Amos — Working from home is great for flexibility. However its important to arrange for someone to look after the kids (when they’re not napping) so you can focus on work and be productive. Group activities like camp and sports leagues are great for this.

  2. My husband and I are away from our families and had our daughter on a few small income, at first. The best advice is to find used clothing sources before you have a kid, get good frugal habits in general before you have the kid. Yes, we spent over $1000/month on daycare at first (now more like $830/month) when our mortgage was only $475 but everything else was set, including having a low mortgage to begin with.

    • Great point, Ginger! Having frugal habits in place in the beginning goes a long way towards setting you on the path to success.

  3. Thanks for sharing this! I never thought to barter with neighbors for taking care of kids. It is a really great idea, especially since no one has to actually spend money. Maybe I’ll try bringing that up with my neighbor from across the street. She has a few kids too, and I’m sure she wouldn’t mind something like that.

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