In the United States, new mothers do not take off much time after having a baby, with 25% returning within two weeks of maternity leave. Workplace laws only grant new parents the right to 12 weeks of unpaid leave, for companies with over 50 employees, driving many new parents back into the workplace early, for financial reasons.
Planning ahead is key to maximizing your time with the new baby while earning enough to meet the family’s income needs. Here is a checklist to address childcare needs, when you must return to work:
Compare Costs Across Providers
Not all childcare is equal in cost or quality. Three primary options include day care centers, Au Pairs, and nannies. Daycare centers charge by the child and often provide multi-child discounts. Au Pairs and nannies can become more affordable if you have multiple children in their care, although they should have training specifically addressing the care of babies.
The average cost for infant care at a daycare center is $211 per week, or nearly $11,000 a year. Au Pairs cost an average of $367 each week for an annual cost of over $19,000. Nannies charge the most, averaging $565 per week for an annual bill of over $29,000.
In addition to direct costs, consider the proximity to work, sick care options, and the flexibility of available hours. The earlier you plan, the more likely you will be able to find the right childcare provider at a price you can afford.
Host an Au Pair
An Au Pair involves a cultural exchange and takes a little time and money to set up, but can save you money in the long run. The Au Pair lives with you and typically works up to 45 hours each week. You pay them a wage plus room and board. It is typically a less expensive option than a nanny and can be less than formal daycare if you have more than one child in their care.
The Au Pair program is run by the State Department and requires you to follow their guidelines, live in an area serviced by the community council, and be a U.S. citizen to participate. Au Pairs can obtain additional certifications to work with infants or special needs children.
Utilize Work Benefits
Employers acknowledging the high cost of daycare may offer assistance to reduce the financial burden of providing care for children. Benefits may include reimbursements, on-site daycare facilities, and flexible work schedules. Employers today are more open to flex time schedules, which could allow you to work from home one or more days a week. It might also be possible to adjust your office hours to accommodate your child care needs better.
The Human Resource or HR department and co-workers utilizing benefits are great resources to learn the ins and outs of work benefits.
Participate in the Employer Flexible Spending Account (FSA)
Many employers offer Flexible Spending Accounts or FSA’s as an employee benefit. You have the opportunity to set aside money for childcare with pre-tax money, lowering taxable income. You can then use the funds to pay for qualified childcare expenses. Using pre-tax dollars saves an average of 30% on daycare costs. Parents filing a joint return, single filers, or the head of household can deposit up to $5,000 to an account each year. It is possible to sign up for FSA plans through both partners work, if available, to increase annual contributions.
Most employers require enrollment in the fall, to receive benefits the following year. A new employer will often allow mid-year enrollments. However, the funds do not roll over at year end, so you must calculate costs carefully. Once enrolled, your employer transfers a set amount from your paycheck into your FSA account, and you can use the money towards qualified childcare expenses for children under the age of 13.
Tax Credit for Child Care
Tax credits can directly reduce your tax bill, rather than reduce taxable income. You cannot double dip and take both the FSA and the child tax credit for the same funds. However, any qualifying child care expenses paid outside the FSA account may qualify for the tax credit.
The purpose of the child care credit is to provide financial relief for working parents by giving a percentage of the expenses paid towards childcare as a tax credit. You can receive a credit of up to $3,000 for one child and up to $6,000 for multiple children. The IRS bases the credit on the parent’s earned income and the amount paid towards child care services for children under the age of 17.
Explore Flexible Work Schedules
One effective way new parents reduce daycare costs is by working alternative schedules with your partner. Schedule adjustments might include altering days off to working opposite shifts.
Set a Childcare Budget
After exploring local options set a working budget that will allow you to live within your current income while providing quality care for your child. Establishing a budget gives you a benchmark to anticipate costs each month, compared to other financial needs and priorities. After determining a budget, you will be able to choose the appropriate care within your financial restraints.
Test Out the Plan Before Making a Final Decision
Making a couple of dry runs before finalizing your childcare will set expectations and reduce stress. Create an emergency contact list, which should include the baby’s pediatrician, work and cell numbers, and other local emergency contacts. Also, put a plan in place for times when you have a sick child, or you need alternate care.
Returning to work with an infant can be a stressful experience. Creating a weekly or daily routine will help with the adjustment, along with having confidence in your childcare solutions.
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