Money Mondays: How to manage childcare costs as working parents

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Money Mondays is your go-to guide for all the information you need to manage your finances. For this week’s column, we ask Caroline Hughes, co-founder and CEO of life planning website Lifetise, to answer all our questions about managing childcare costs.

If you’re thinking of having children with your partner, then chances are that both of you will need to work to bring in enough money to cover your living costs. In fact, there has been a surge over the last 20 years in the number of mothers of dependent children who work, with nearly 75% of us in full-time or part-time employment (up from 11% in 1996).

The move to more flexible working has helped, as changes to employer attitudes and technology advances have made it easier and more acceptable to work remotely, or to have more control over your working hours.

But one of the biggest challenges for new parents is figuring out how much you each need to work, when you factor in the costs of childcare.

Nearly 75% of mums are in full-time or part-time employment

How much should I expect to pay in childcare?

Age 0-2 is the most expensive period for childcare. This is because, by law, the ratio of staff to babies for under twos has to be much higher, meaning that you’re covering more salaries.

The average cost in Britain for nursery for under twos is £232.84 per week, according to the Money Advice Service. For a lot of parents, that is a huge chunk of their income, so it is well worth planning ahead.

The good news is that once your child turns three, the costs ease up. All three and four year olds in the UK are eligible for some free childcare. The amount you get depends on whether you live in England (up to 30 hours per week for 38 weeks), Scotland (16 hours per week for 38 weeks) or Wales (10 hours per week for 38 weeks).

And once your children reach school age, you can rely on before and after-school clubs or childminders, which tend to be much cheaper.

What help with childcare costs is available?

There are various government schemes available to help with childcare costs, including tax credits. Trying to understand which ones you are eligible for can feel like an impossible quest, but the government does have this website to help you (be aware that you will need details of your salary, tax and any benefits you get, to use it).

You used to be able to get childcare vouchers through your employer, but this is being phased out in October 2018 and will switch to the government’s Tax Free Childcare scheme, where you can get up to £2,000 per year towards your childcare costs.

And of course, there is always traditional help in the form of grandparents!

There are various government schemes available to help with childcare costs, including tax credits

Hidden extra costs

Some nurseries require you to provide things like nappies, food, and sun cream, or some will charge you extra costs to cover these things. This can add up, so make sure you ask about any additional costs.

How to choose and find great childcare

Broadly, your paid options are a nursery, childminder, nanny or au pair. The costs differ, with nannies being the most expensive as a rule, although some parents share nannies to reduce the cost.

Lifetise’s Childminder tool lets you compare different options to figure out the optimal mix of working days and childcare costs, so you and your partner are equipped to negotiate with your employer.

When it comes to choosing childcare providers, word of mouth is still your best bet. Check in with other parents in your NCT group to see if they have older children and can give recommendations. Visit nurseries so you can get a feel for the environment and ask them how many carers there are for the number of children and what qualifications they have. Nannies are best found through agencies who do background checks, and it’s important to take up references.

If you just want to get an idea of what’s available in your area, then this website lets you search locally.

If you want to get the government’s free or subsidised childcare, then you’ll need to go with a government-approved provider. Your local authority will often be able to help you find these in your area, or try this childcare finder.

When should I start planning?

Good childcare providers get booked up early and many have waiting lists, so although it may seem crazy, ideally you would start researching your options during pregnancy.

Images: Jelleke Vanooteghem, Unsplash, Rawpixel, Tanaphong Toochinda