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Exploring Child Care Costs

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If it feels a little quiet around these parts, it is because I'm still adjusting to becoming a dad. I predict that it will continue for the next 20 years... probably longer. I'm learning quite a bit and I think a lot of this will be reflected in the my writing in the future.

One of the first questions that comes up with parenting, is who is going to take care of the baby? It's Baby 101. The options can be split into two categories: someone in the family and hired help (okay, sometimes a combination of the two is possible). Taking care of a baby requires time and that is still a finite resource (until my flux capacitor shipment gets off backorder)... very often that's going to cross over to personal finance.

Given that I work from home, on this online business that I like to attempt to grow (even if it is Syphilian at times), the natural choice would be for me to take care of the Little Man. My wife's closeness to the military pension and a transferable free college education (transferable GI bill is great), her income, and health care, made it quite clear that she wasn't an option to stay at home with Little Man. With no other family in Silicon Valley that eliminated the options that some other people choose.

Then there's the option of hired help. A few months back, I looked into a local Kindercare and priced out their 5 day a week program at around $22,000 a year. That's all after tax money, so it would be a little like taking away a $26,000 income away. Ouch! There were part-time programs, but the pricing structure is perhaps even more prohibitive. The pricing for just two days a week was around $14,000 if memory serves. It got to the point where the cost for 4 days a week was exactly the same as 5 days a week.

My wife and I next went on Craigslist to see about a nanny share. The theory is that a few hours a day off would allow me some time to focus on my work. It's a good theory, but even nanny shares aren't cheap. I typically found prices in the range of $18 to $25 an hour which, even at part time would add up to the $22,000 a year or more.

Lastly, we looked into an au pair. We found that this would be around $8,000 a year, but require giving up our office, which would require some significant downsizing. It wouldn't be impossible and of all the choices seems to be the most practical solution. I would need to do more research to see if there are any other "gotcha's" with this... well aside from having a stranger live with you all the time.

As I was thinking about the au pair solution another idea occurred to me. If I look at this differently, doing the child care myself would be like giving myself a raise of $25,000 in that it saves that $22,000 after tax cost... as long as my businesses don't go completely in the tanker (and I have reason to think they won't). There's also the added advantage that me and Little Man could learn Spanish and Chinese together. That could be a tall order, Little Man is already two weeks old and he hasn't even gotten to a remedial level of baby sign language. If this any indication of his learning aptitude, perhaps I should push his Taekwondo lessons back a month.

Posted on October 10, 2012.

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12 Responses to “Exploring Child Care Costs”

  1. Nick says:

    My wife and I have 4-month old twin boys and we hired our nanny using Care.com. As the employer, you need to subscribe and it costs something like $15 a month (depending on your subscription), but it’s a nice way to advertise your position and have caregivers apply directly to you. The website, which is free for caregivers, requires them to submit to a background check and provide references.

    We advertised our position and received more than 25 applicants over several weeks. We interviewed several people and ultimately hired a young woman who previously served as an au pair in Italy. She’s awesome. We’re very happy thus far.

    How much you pay for an in-home nanny can vary widely depending on the city you live in, of course. We live in a small, midwestern college town, and we pay *significantly* less than that $18 to $25 per hour range you cite above.

    That’s the real beauty of using Care.com. As the employer, you set the terms and let people come to you. I even drafted my own “employer-nanny” agreement that specifies compensation, vacation, etc.

    The biggest downside so far has been figuring out the taxes. As a household employer, if you pay more than $1,800 per year (I believe), you’re required to withhold social security and medicare taxes and pay certain employer taxes, including unemployment taxes. It’s a nightmare if you “do it the right way.” Of course, you can always just pay under the table, but that could bite you in the rear down the road if an ex-nanny attempts to collect unemployment.

    • Lazy Man says:

      I’m sure that most places have nannies at lower prices, but the cost of living in Silicon Valley pushes everything up significantly over a small midwestern college town. We are a few cents shy at $5.00 gas for example.

      Thanks for the tips if we go down the route. I have a friend or two who have hired nannies, and I think they’ve mentioned the pain of paperwork, taxes, and such.

  2. Patty says:

    That’s some harsh reality. I guess I wasn’t paying attention when you mentioned parents (your parents and hers). I’m assuming they live back East.
    I have been the free babysitter for both my daughters for 7 years now. I love my grandkids and I’m so happy for the opportunity to bond with them. I’m also lucky to be in a financial position where I could do this for them.
    I hope you find a solution that works. I have to warn you though…you think you’re going to get all those neglected chores done during nap time…Hahahaha! Guess who ends up napping right along with baby.

  3. Steve says:

    The nanny share prices sound crazy. Not in absolute terms, but in relation to the kindercare prices. I would expect part time nanny sharing (which I take to mean, one nanny watching multiple families’ children) to be both cheaper and more flexible. Our kid is in kindercare, and they take reasonable care of her, but they’re very inflexible about payment. They have charged us a full week even though the center was only open half a day the whole week due to inclement weather. Another thing you could look into is an “in home day care.” They are generally more flexible about part time and whatnot.

  4. Peter Renton says:

    There is another option, Lazy Man, that you didn’t mention. Hire a local high school student to give you some temporary help when you need it. Ideally this is someone who is within walking distance. We pay a local 15 year old $7 an hour (to mind two young kids) on an ad hoc basis. The bummer is that they can’t do 20 hours a week but for $50/week you can get seven hours of care which will allow for you to get a break and even you and your wife to have a date night. It might take a while to find someone suitable but if you start asking around I am sure you can find some options.

  5. robyn says:

    best thing i did when i had my oldest was hire an experienced child care person to take care of her a few days a week. yes i work form home but the only time i could work was from 1 am to 4 am IF the baby slept. which she never did. some babies just don’t. i walked around like a zombie for the first few weeks, went i went back to work at the office it was soooo restful. besides who wants to work when there is this little person you cna hug and kiss all day?
    good news? one of the grandparents is coming out to help? hope it works the way you anticipate it working.
    and CONGRATULATIONS! enjoy this.

  6. MJS says:

    Not that I am pushing one way or the other, but why is a day care after tax money? My wife and I each put $5000 in pre-tax money in to a dependent care account at work. It doesn’t cover the whole nut for both kids, but it’s still 10k in pre-tax dollars.

    There is something else to at least factor. Skilled care givers are just that. They are experts in infant CPR, first aid, etc as well as how to develop a child emotionally, physically and educationally.

    I am not one to toot my own horn (as you’ve known me a long time). Most of my cousins kids are cared for by stay at home moms while mine go to day care from about 8:30 AM to 6 PM (based on how much I pay, its around 6 bucks an hour each). I would say that my kids are significantly more socialized and acclimated around other people than those who stay at home with mommy and have occasional play dates. There is something to be said for them being around the same set of kids every day.

    Again, this should be an extremely personal decision, just throwing out some thoughts other than just financial.

    • Lazy Man says:

      As a self-employed person, I don’t have a dependent care account. My wife doesn’t have one with the military either. Maybe there’s a tax break that I take.

      Yes, I can definitely see how being around other kids would help with socialization. We bring our dog to the dog park nearly every day for the same reason.

  7. Laurie Pysczynski says:

    Find yourself a college student and offer to work with her class schedule since you are home all day. This could be a 2-4 year deal for a college student to work a flexible schedule and will allow you to save money and still have your son well cared for a few hours a day.

  8. It sounds like a dependent care FSA is not a fit. You can utilize a child care tax credit -$3,000 for one child. The percentage saved works on a sliding scale by adjusted gross income to 20% for AGI above $43,000.

    It shaves at least $600 off the total – not enough to change your decision.

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