Wait, Day Care Is Now More Expensive Than College?

Personal Finance
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In a stunning reversal of a decades-long trend, nearly 30% of American moms are now setting aside careers to stay at home to care for their children, according to a new report from the Pew Research Center.

After bottoming out at 23% in 1999, the percentage of women staying at home has jumped to 29%. The reason appears to be economic: Only 5% of those mothers now staying at home have a master’s degree and a family annual income of $75,000 or more, the Pew report notes.

The average middle-class family with a child born in 2011 can expect to invest $235,000 over 17 years to rear a child, according to the United States Department of Agriculture. The cumulative cost of raising a child has ballooned, and the big reason is day care.

How big? The cost to send an infant to day care is now higher than in-state college tuition and fees in 31 states, according to a November report from Child Care Aware America. Christopher Ingraham of the Washington Post notes, tongue-in-cheek, that this new data “suggests that we should similarly start putting money away for day-care expenses when we’re roughly 8 years old. Sorry, kids: Your allowance money is going to the day-care fund now.”

While costs vary widely from state to state, the CCAA report found that infant child care is now more expensive than the average cost to feed a family of four. Child care fees for two children exceed the average median rental payment in all 50 states, and the housing costs for homeowners with a mortgage in 20 states.

So how should you confront all this? Here’s our advice to make sure you’re saving cash while protecting those most dear to you.

Employer-provided child care might be the simplest option

Not only do some employers subsidize child care,  you can also get a tax break on your spending. Many companies run their own child care services at a much lower cost to employees. Companies can also provide referrals or discounts to child care centers. You might be able to pay for child care through an employer-offered dependent care flexible spending account, to which you can contribute up to $2,500 a year tax-free for qualifying expenses.

If you work in the public sector or for a company with more than 50 employees, you might be eligible for the Family and Medical Leave Act, which provides for up to 12 weeks of unpaid leave to care for a sick child.

Another option is asking your employer to telecommute, either full-time or part-time, to watch your kids while working from home.

There are a number of government tax credits available

Often, you can qualify whether or not you’re employed or low-income. Not only are there tax credits available, you can also turn to federal agencies for help in finding a reputable sitter. Each state administers a federally funded child care and development program; this website will direct you to the right agency for your state.

In addition, the government offers a few programs:

The federal Child and Dependent Care Credit will reimburse up to $3,000 a year for a single child, or $6,000 a year for two or more. Child care expenses, in this case, include day camps as well as babysitting. And 24 states offer additional dependent care credits.

If your child needs to go to a special camp or requires extra care because of a medical condition, you might also be able to count those expenditures as medical expenses. You can deduct your and your dependents’ medical expenses above 7.5% of your adjusted gross income.

Top 4 safe, inexpensive alternatives to sitters

  1. Do a nanny share. Diffuse the cost of hiring a nanny by sharing one among a group of families. Before you enter into an arrangement, figure out who will host the nanny and shell out payroll taxes, rules on extra compensation and the length of the contract. Be sure to get it in writing, no matter how close you are to the other families.
  2. Babysitting co-ops. This arrangement distributes child care responsibilities over a group of families. This option works well when the families have different schedules and can cover for each other.
  3. Off to grandma’s house we go. If your parents, grandparents, aunt or great-uncle twice removed happens to live nearby, see if they can pick up one or two babysitting shifts a month.
  4. Hire an au pair. Depending on how much you pay for child care, hiring an au pair—a live-in nanny from overseas—might be a cost-effective option. You can go through programs like AuPairCare or Au Pair in America to find an international voyager who’ll live with you for a year, take care of your kids and get a taste of the States. Weekly rates start around $350 for a basic au pair care.

Read more on NerdWallet

How to Save Money on Child Care

Do You Qualify for the Child or Child Care Tax Credit?

Ask an Advisor: Tax Issues for Day Care

Illustration by Brian Yee.