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How to Budget for the High Cost of Child Care

Are you ready for a statistic that will make your head spin?

One year of child care costs more than the average price of in-state college tuition.(1)

So, if you feel like daycare prices are out of this world expensive, you’re not going crazy—you’re right! And with more families having both parents in the workforce than ever before, the need for child care will continue to grow. According to a 2016 study by the Bureau of Labor Statistics, both parents work in 61% of married couples who have children.(2)

Don’t Feel Guilty

Before we dive in, let’s clear the air here: You don’t need to feel guilty for being a working parent, okay? I get it. I’m a working mom too. And although I love what I get to do every day, sometimes it’s easy to start to feel a little guilty about not spending the entire day with my kiddos. But hear me—if you choose to work outside of the home, that is okay! Or if you choose to stay at home, that’s okay too!


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My friend Christy Wright has a great saying about this, "Don’t look at what you’re leaving behind. Focus on the importance of what you’re going to." So when you’re at work, clear your mind and focus on your tasks for the day. And when you’re at home, soak up that time with your family and be fully present in the moment.

How Much Are Daycare Prices?

Get ready for some major sticker shock. According to a study by Care.com, the average daycare cost in America is $9,589 per year, while the average cost for in-home care (like a nanny) is $28,354 a year.(3) Yikes! Now that cost varies from state to state so you might be spending way less or way more. For some of you, child-care costs could add up to be the largest line item in your budget—even more than your rent or mortgage!

How Will Daycare Costs Fit in Your Budget?

It goes without saying, but your budget really needs to support whatever child care option you pick. So, if you have your sights set on having a live-in Mary Poppins around the house, just be sure your budget says that kind of thing is a possibility for you.

Of course, making budget cuts is a great way to help free up extra cash. But remember, these will have to be permanent budget cuts for them to work. And by permanent, I mean as long as you have kids who need child care.

So how do you find the money? Well, if you know you’re going to have a baby, you and your spouse need to start talking about work options. If you decide you’ll both work outside of the home, then start to plan for child care just like you would the delivery expenses. Do a couple of trial runs in your budget to see what amount you can make work for you and your family.

Also, start to look for everyday ways to save, like cutting the cable at your house. That can usually free up $150–200 right there. Scale back on going to restaurants and hitting up the drive-thru. Limit your family to eating out once a week or even twice a month and see how much you could save. What about subscription services you don’t use anymore? I’m looking at you gym membership, food magazine subscription, and wine of the month club.

Cost-Benefit: Staying Home vs. Paying Daycare Prices

If you’re paying for daycare costs for two little ones, you could be spending nearly $20,000 a year or more. If both you and your spouse are working full time at good-paying jobs, that may not be an expense that worries you. But let’s say one of you makes an annual salary of $25,000. That means nearly all of your take-home pay is going right back out to cover the cost of daycare prices. You might barely be breaking even!

If you love what you do, then it could be totally worth it. But if you’re working at a job you hate just to cover the bills, then you might want to consider what it would look like if you or your spouse stayed home to eliminate the daycare costs. It’s a very personal decision that comes down to what is best for your family and your situation.

Child Care on a Budget

So, the big question here is: Is it possible to save money on daycare prices? Well, it’s definitely worth a try! Contact the daycare facility you’re interested in and see if they offer any type of grants or scholarship options. It never hurts to ask!

Depending on your income and filing status, you might be eligible for some tax breaks when it comes to child care too. Your daycare costs could be deductible! Contact a trusted tax pro if you want more information on that. Some employers even offer Dependent Care FSAs that let you take money out of each paycheck (pre-tax!) to put toward your child care costs. Of course, there are some restrictions with this, so check with your employer to see what they offer. It’s a great option to help you get a little bit of a break on an already planned-for expense.

The good news is that the price does change based on your child’s age. So, even though you might be spending a good chunk of change on daycare prices for your adorable newborn right now, your daycare prices will likely drop when they’re a toddler on the move. And, some daycares will even give you a discount if you have more than one child. Be sure to check with your (or your spouse’s) workplace. They might offer a company discount to daycares near the office.

Which Daycare Option Is Right for You?

So where do you start when it comes to selecting a child care program? Sure, there’s a lot to think about, but don’t let yourself get overwhelmed. If you’re not sure which option is the best fit for your family, you and your spouse can do a little research of the choices in your area. Just make sure you talk through your options and are on the same page! Bottom line, it’s your and your spouse’s decision to make—no one else’s.

Other Cost-Saving Options


If you have family members who live nearby and they are willing to help, take advantage of that! Nana or Gramps would probably love the extra time and cuddles. Plus, you get the added bonus of knowing your child is in great hands and getting quality time with people who love them. I mean, they raised you and you turned out well!

One Parent Stays Home

If you find that those daycare prices are just too much to stomach, maybe one of you can consider becoming a stay-at-home parent. Remember, this doesn’t only apply to mom. In fact, 16% of stay-at-home parents in America today are dads!(4)

Alternative Work Schedules

If both you and your spouse want to focus on your careers but don’t want to send your child to daycare, getting creative with your work schedules could be a great option! Maybe Mom is a teacher and can work 6 a.m. to 3 p.m. and Dad is a police officer and can work a 4 p.m. to midnight shift. Of course, this might not work for your family’s situation, especially over the long term, but it’s a great short-term option if your work schedule is flexible.

On-Site Daycare at Your Company

You have on-site daycare at your office? Praise-hands emoji! Many companies have started opening up on-site daycare centers for their employees at a cheaper rate than they would normally find around town. And you could even play with your little one on your lunch break—how amazing would that be?

Nanny Share

Can’t afford a nanny? Look at getting together with another family you know and sharing the cost of paying for a nanny. Plus you already know your kids will get along with their playmates.

Start Your Own In-Home Daycare

If you decide to stay at home to watch your own child, why not start a side business and provide great in-home care for other families in need too. You’ll be able to spend time with your child while making extra cash. Not too shabby!

It’s Only a Season

At the end of the day, remember that you won’t pay high daycare prices for the rest of your life. This is just a season, and it will pass. Before you know it, your kids will be in school (cue all the tears!). You might even feel like you got a raise when you don’t have to shell out money for child care each month!

And hey, if you want to learn how to budget better for every stage of life, check out my new Budgeting That Actually Works course inside Ramsey+. It's just one awesome Ramsey+ perk. You'll also get way more online money classes, the premium version of EveryDollar, and our money goal tracking app. And right now, you can try it free. Yes, free. So jump in and start a Ramsey+ trial today. 

Rachel Cruze

About the author

Rachel Cruze

Rachel Cruze is a #1 New York Times bestselling author, financial expert, and host of The Rachel Cruze Show. Rachel writes and speaks on personal finances, budgeting, investing and money trends. As a co-host of The Ramsey Show, America’s second-largest talk radio show, Rachel reaches 18 million weekly listeners with her personal finance advice. She has appeared on Good Morning America and Fox News and has been featured in publications such as Time, Real Simple and Women’s Health magazines. Through her shows, books, syndicated columns and speaking events, Rachel shares fun, practical ways to take control of your money and create a life you love. Learn More.

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