How to Create a Child Care Budget for the Fiscal Year

The average family spends $6,700 a year on childcare in the United States, according to The National Association of Child Care Resources and Referral Agencies (NACCRA; see Resources). By planning and organizing a budget for childcare expenses, parents can have a greater control of their finances--maximizing where dollars are spent, yet assuring their children are in a nurturing, safe environment.

Things You'll Need

• Calculator
• Income statements
• Estimates of childcare from a variety of sources
• Calendar
• Employer benefits information

Instructions

1. 

   Determine a schedule. The times of day you will need assistance with child care can vary from early morning to late afternoons. The time of year also has an impact on creating a budget, as children are in school and may require more or less time in a child care setting. The first step in creating a budget for the fiscal year is to look at these two different areas of time---both daily times, as well as seasonal times.

2. 

   Compare programs in your area. For children not yet in school, programs can include full-time day care, preschool or half-day programs. Locations include commercial settings, in-home settings and churches and community centers. Many times a program will require you to sign up several months to a year in advance. Each program will charge differently. Ask if the programs operate in the summer, or if hours will be different during this time. Always ask for several references and credentials. According to the NACCRA's "Childcare in America: 2008 Fact Sheets" the average cost for an in-home care provider ranged from $3,900 to $9,164 per year, and the average cost for care at a childcare center was $3,380 to $14,591. The age of the child, whether an infant or preschool age, is the biggest factor when determining cost.

3. 

   Don't discount friends and family. Many times close relatives or friends of the family may be able to assist with child care. Retired neighbors and others can sometimes help with childcare for a few hours in the morning or after school. It is always important to have a back-up in case of an emergency. Before-school programs can run between $2,080 and $8,600 per child, according to NACCRA's 2008 report. Variables include if the setting is a center or a home as well as what time of day care is needed. Some families will need only morning care, while other may need before and after school care. Saving several hundred dollars a year by utilizing family and friends is an option.

4. 

   Discover if you qualify for childcare tax credits. According to the IRS, "If you paid someone to care for a child, spouse or dependent, you may be able to reduce your tax by claiming the Child and Dependent Care Credit on your federal income tax return." The credit is based on the percentage of your income that goes directly to pay for care. Many times you must choose between taking a tax credit or contributing to a flex spending account as described below.

5. 

   Explore your employer's tax benefits. Many companies now offer Flex Spending Accounts, or FSAs. You are allowed to contribute up to $5,000 of your income per year for childcare expenses, and you do not have to pay tax on this amount (including Social Security and Medicare taxes). Some employers will also match a contribution. You must spend all of the contributions in your account that you have set aside for that year. Also, you must decide before the beginning of the year how much you will contribute. If you don't spend the money in your FSA account, you lose it.

References

• Child Care Aware
• ational Association of Child Care Resources
• Internal Revenue Service Dependant Care Credit FAQ