It’s true, children aren’t cheap. Especially when you look at the cost of childcare in England.
The average cost for preschool childcare stands at £127 per week for a part-time nursery place, or £242 per week full-time (according to The Money Advice Service). Meanwhile, parents are paying an average of £59 per week for after-school clubs and £133 per week for holiday clubs during school breaks.
So, if you are nearing the end of maternity/paternity leave or returning to work after a stint as a stay-at-home parent, it’s best to consider your childcare options and how you can pay for them.
Different types of childcare cost different amounts. According to The Money Advice Service figures, the cost of a part-time childminder is slightly lower than that of a nursery place (£113 per week), while the cost of a nanny is understandably higher at between £250 and £400 a week plus tax and National Insurance (NI) contributions.
If you are looking to budget for the cost of childcare, you need to know how many hours you need childcare for. Nurseries typically work in half days or full days, with food/nappies/wipes either included in the price or added to the bill. Childminders can be a bit more flexible with hours, but that would need to be an arrangement agreed between you and them.
If you think you want to go down the nursery route, then compare a few nurseries in your local area. There are likely to be different ones for different budgets.
Also consider any free childcare options. Can a family member help out occasionally to keep the costs down?
Once you know how many days your child will need to be in childcare and the cost of that, you can work it into your monthly budget as a fixed cost. If you have more than one child, ask your nursery or childminder if they offer any sort of sibling discount in order to bring the costs down.
There are also some government schemes to help with the cost of childcare, which I will cover in a moment.
Even if you are not in the ‘baby zone’ any more, that doesn’t mean that your childcare costs disappear.
If you have a child of school age and your working hours go beyond the school day, then you will need to budget for before- and/or after-school clubs. Additionally, if you are unable to cover school holidays from your annual leave allowance or make other arrangements, you will need to factor in the cost of school holiday clubs.
There are government schemes designed to help with the cost of childcare. So it is definitely worth doing some research and seeing which ones you can take advantage of.
Funded hours Children aged three and four in England may qualify for free childcare hours. These are either 15 hours a week for 38 weeks or, if you qualify, 30 hours a week for 38 weeks. Some people stretch the 30 hours option over the full year, making it 22 hours a week. Children are eligible for funded hours the term after they turn three years old. Just be aware that some childcare providers may require you to pay wraparound fees in order to use the funded hours: for example, you can use three funded hours a day but need to book a minimum five-hour session, so are required to pay for the other two hours.
Tax-free childcare This is a government scheme, under which, if you are eligible, the government will top up your contributions into the childcare account that you set up. You can receive up to £2,000 per child per year towards your childcare costs. Essentially, for every £8 you pay into your account, the government will top it up by £2.
Universal Credit Working families who are eligible for Universal Credit can claim back up to 85% of their monthly childcare costs.
Childcare vouchers This scheme is being replaced by the Tax-free Childcare initiative; however, if you already receive childcare vouchers and your employer continues to offer them, then you can continue to use them. You purchase the vouchers through your employer before tax and NI contributions are made, saving you money.
As with anything financial, having all the facts makes decisions that much easier. Make sure you calculate what your monthly childcare costs will be and how they will affect your budget in terms of meeting other fixed costs and leaving some disposable income. Also, consider your options and take advantage of what the government has to offer, as any sort of saving could make a difference to your everyday finances.