How do you decide how much you can spend on childcare?

[Ironica]

So... my work wants me to come back from maternity leave, like, yesterday. ;-) They miss me. And to boot... I was PT when I left, but they really, really want me full-time. I like a lot of my job, and my boss suggested me for a role in a grant that I'm somewhat familiar with, that would be really interesting, and pretty much guarantee me full-time hours for the next six months (it's a non-profit, so funding is always an issue). The others involved thought that it was a great idea, so the position is mine if I want it.

But... I have a not-quite-3-month-old. We interviewed a great nanny today. She's currently employed part-time, so we could start off part-time for a couple weeks and make sure it's a good fit. She's recommended by a personal friend, who is also a member on this board. ;-) She's apparently comfortable with all our parenting practices. She's got years of experience and glowing references covering her entire history.

Of course, she's pricey. Her rate is about 57% what mine is (and I'm well-paid). If I go to FT hours (32 or more per week), I'll be eligible for benefits on top of that, but it's not a great package or anything. I'll have a lot of flexibility about working from home and stuff, but I'll definitely have to be in the office and also on-site at the clinic where this program is being rolled out much of the time. My boss said that she's "pretty sure" they can do "more than" my current rate, at least for the hours I'm in the program manager role, and she's not the type to say that if it's not true, but she also didn't give numbers.

I didn't give actual numbers because cost of living and going rates for childcare are so highly variable based on geography, and I didn't want to detract from the issue at hand, which is establishing how much I can afford to pay for childcare... but if they're necessary to offer meaningful opinions, I'm willing to provide them.

I also don't know anything yet about what we have to do in terms of taxes and 1099s and how to use an FSA, though we have a great accountant who I'm sure will walk me through it all.

So, thoughts on childcare budgeting? How much of one's pay can you afford to pay in CC? (FTR, DH is fully employed in a stable job, making good money, though our budget doesn't *quite* break even without me working a few hours a week, since our mortgage is large and we spend a LOT on food, due to lots of dietary restrictions and that being our big luxury. We already don't have cable and only own one car, a 2002 Honda Accord that's fully paid off. We carry no debt beyond the mortgage and have lots in the bank, but are planning a remodel that will use up a lot of that.)

[holidaymama]

Wow! That's a tough one! I think it really is up to you...Our daycare is about 1/4 of my income.

If you want to work than you will be able to justify it, but if you want to stay home, than you'll always be able to justify that over half of your paycheck is going to childcare!

Life is a double edged sword! Try it out...if it doesn't work, don't do it!

[Ironica]

Originally Posted by holidaymama

If you want to work than you will be able to justify it, but if you want to stay home, than you'll always be able to justify that over half of your paycheck is going to childcare!

Well, I'm pretty sure I want to work. I'm just unsure whether it makes sense for us to spend THAT much on childcare. Daycare would be miles cheaper, but for a variety of reasons I'm more comfortable with a dedicated caregiver in our home. We've also looked at au pair programs, which would cost us about $15-20k/year in out-of-pocket costs (agency fees, travel expenses, stipend) plus room and board. My BFF has had really great experiences with them... but then, they're a very different sort of family, so it's not automatic that it would meet our needs perfectly.

*sigh.* I should have started on all this a looooong time ago.

[bobandjess99]

It's just so personal.
I couldn't leave my 3 month old that much.....even if i wanted to be working....that;s me.
that aside.....
Here, we *need* me to make a certain amount each month to get by. I can make that much in about 10 hours per week.....and i can scheudle those 10 hours around dh's schedule, so we pay nothing for childcare. I have run the math, and I don't gain much of anything by working any more..If I were to work full time, the amount I would take home after paying for decent daycare would be exactly the same as working 10 hours and not paying for daycare.
So...now, if I REALLY wanted to work..if my job were somehow that fulfilling and important to me, and it was a necesary part of my identity, my life, my happiness. then okay...i can see working fulltime and paying for childcare, just to take home the same amount as working 1/4 time.
but...*I* don't need to work that badly...*I* don't get that much joy, happiness, fulfillment from my job that I am williing to work those extra 30 hours just to pay someone else to raise my kids. (although, I've been recently tempted since dd has turned into a hideous monster of evilness.(shes 3.5)...LOL!)

so I think you need to look at it with all the facts. What exactly would you make if you only worked a little bit versus full time? What would teh fdiffference in take home be after paying for childcare? how important is it to you that you work, and how much and what you work at?
Only you can answer some of these questions.

Would *I* work just to give 57% of it to someone else so they could raise my kids? no.
Is it the better choiuce for *some* people?
Yes.
Is it a good choice for *you*?
*shrugs*

[Purplehaze]

Would day care be more affordable?

Are thee any in your area? Have you checked into them? I think I would have a hard time paying half my pay for day care.... Is there any chance you could work 4 10 hour days or anything creative like that, so your DH could watch the kids part of the time, and have her a bit less??

[Logan's Mom]

Well, my DH takes home $440 a week and our childcare is $160 a week. He just started carpooling so we will see how that goes, but before that, he was spending $100 per week. With that said, we are looking into moving closer to dh's work, but childcare expenses will increase. DH also puts aside 7% of his pay into retire which the company matches, gets an annual bonus, pays for benefits out of his paycheck, so in reality his $440 is more then that.

We went to a financial advisor and discussed the possibility of dh not working. We ran the numbers and suggested that he does. What he brings in really makes a difference, which I really didn't think it did.

I guess my point is everyone's position is unique.

I suppose you could check out the nanny part time, if it works, use her full time. You said it was only guarenteed for 6 months right? Could it be possible to accept it then decide it doesn't work for you and your family? Would your boss be ok with letting it go back to the way it was? That would be my biggest concern.

[aeramom]

I have heard, but not sure where, that you want to make 2 1/2 times the cost of childcare to make it financially worthwhile to work (I can't remember which financial planner/advisor says this, but I believe they took into account taxes, additional expenses, etc. associated with the second income in order to figure it out).

But, everybody's circumstances are different -- if you need the income to make ends meet, then making less than that would obviously make sense. It also sounds like you enjoy your work and want to go back, so it may make sense for you to pay a higher percentage now for care. Not sure how you feel about this, but you may find it appropriate that your child be in a group care setting later on (preschool/preK age) for at least part of the time, and the $ would be less then. Also, since you have found such a great sounding nanny, do you know anyone else that needs childcare? Would it be possible to nanny share for all or part of the hours? That might reduce your outlay significantly and the babies would have still more attention than in a daycare setting. (If the nanny is open to that)

We did hire a nanny for a little while, and if you follow the irs regs. and pay your portion of Medicare/Soc. Security taxes, your portion will be 7.265% of whatever she charges (and you also withhold that same amount from her check and file it with taxes later). You also end up paying federal and state unemployment taxes, which aren't all that much percentagewise. It all adds up though, so I'd definitely have the accountant help you run the numbers to see if it all makes sense.

I also have known people to be happy with their kids in all kinds of different care scenarios, so there may be other options for you too if you really want to go back.

[Ironica]

Ok, to give more details...

* While we do plan to have DH work from home more (probably one day a week or so), he doesn't have the option of working from home in lieu of childcare. There *has* to be another primary caregiver around by his company regs.

* I do not, personally, feel that I see enough of my husband. I am not willing to stress our relationship further by spending the time he is home at work, nor is that really an option since we both have "office jobs," and generally need to be at work during "the work day."

* The general decision about whether to go back to work is a tough one, and not the one I'm discussing here. I'm really just looking for input on the issue of how you budget for childcare.

* The 2.5 number is interesting; I'll see if I can find the original source on that, and how it applies in our situation.

[Tradd]

Would an in-home daycare (as in, at someone's home rather than at a daycare center) be an option you would be willing to consider?

[Belleweather]

I never have felt like I need to be earning a certian amount of money for it to be "worth it" for me to work -- there are other ways to measure the worth of my work life than the money I'm bringing in.

So the way we approached budgeting for child care has been to look at how much unallocated money we have in the budget (after fixed expenses + food, basically) and figure we could spend most of that on childcare IF that was what it took to find a caregiver we felt comfortable with.

Both of the times we've needed daycare, we've chosen small in-home daycares rather than Nanny care. Some of this was cost-based, in that we really didn't want to be as strapped as Nanny care would have made us. But it was also based on wanting our kids to have other kids to play with (even as babies) and being able to find another mother with similar parenting outlook that we felt just as comfortable with as we would have felt with a Nanny.

If paying 57% of your income for childcare doesn't feel right to you, it probably isn't. It might be worth it to interview some other providers and see what other options are out there.

[mightymoo]

I think the first thing to do is to determine exactly how much you would be paying this person, and exactly how much you'd be making after taxes. You said the nanny gets paid 57% your rate, however, I assume your rate is before taxes, I'd want to know exactly how much taxes, how much of her salary can you deduct, what ELSE do you have to pay for her (other benefits on top of that rate, etc).

Once you really know where the margins are, some things to think about: Whether you want to dip into savings in order to go back to work (if it turns out you actually don't make enough or much after paying her), and what would you do when the child is 2, 3, etc. Even if the margin between what you make and what the nanny makes is small, I could see spending extra on a full time in home caregiver for the first year or two, then switching to something less expensive as the child gets older. So in that sense, you aren't permanently paying this persons salary, you are doing it for a year or two in order to further your career, etc.

Also, I wouldn't commit to paying a full time nanny without really looking hard at the options. When I went back to work after having DD, we found a daycare situation where there was a dedicated infant teacher who had only DD and one other half day infant in a home like (in that the buildings were very houses and very homey, not institutional but were not actually someone's home) small daycare setting. I personally did not feel she would have gotten anything more from a nanny over that situation, yet the price was a fraction of the cost of a nanny. So what I'm saying is - don't necessarily compromise your values, but don't assume that what you value isn't available in another setting - just make sure to look for yourself.

[msjd123]

Originally Posted by Belleweather

I never have felt like I need to be earning a certian amount of money for it to be "worth it" for me to work -- there are other ways to measure the worth of my work life than the money I'm bringing in.

So the way we approached budgeting for child care has been to look at how much unallocated money we have in the budget (after fixed expenses + food, basically) and figure we could spend most of that on childcare IF that was what it took to find a caregiver we felt comfortable with.

Both of the times we've needed daycare, we've chosen small in-home daycares rather than Nanny care. Some of this was cost-based, in that we really didn't want to be as strapped as Nanny care would have made us. But it was also based on wanting our kids to have other kids to play with (even as babies) and being able to find another mother with similar parenting outlook that we felt just as comfortable with as we would have felt with a Nanny.

If paying 57% of your income for childcare doesn't feel right to you, it probably isn't. It might be worth it to interview some other providers and see what other options are out there.

This is exactly what I was going to say. I actually started visiting a number of places before I even had an idea of what typical rates were. I visited small home-based daycares, larger business-like places, and I researched what in-home care would cost, and that narrowed the options for us. Ultimately, though, I found that a small home-base daycare suited our needs perfectly, and I was very, very happy with the caregiver, so she has taken care of DD since she was 5 months old. (In fact, since our DD just started preschool, she has room in her schedule! She's in Encino -- PM me if you're interested.)

Basically, though, childcare is the one area of our budget in which I made the decision based on emotion rather than numbers; in this area, that meant $200/week for full-time care even though I could have chosen a lesser situation for as little as $125/week. In my book, top-notch childcare that you feel good about is a #1 priority.

[A&A]

Originally Posted by Tradd

Would an in-home daycare (as in, at someone's home rather than at a daycare center) be an option you would be willing to consider?

We tried an in-home place, and ended up being SOOOO much happier with a daycare center. At daycare centers, you never have to worry about your provider being sick, because someone else will always be there to take care of your child.

Likewise, if your provider is stressed, there will be someone else to trade off with at a daycare center. Not so if you just have one person looking after your child.

(And I realize that moms don't always have a back-up if they are sick or stressed. That's not the point. It's nice for your provider to have an automatic backup.)

Also, home providers always seem to be busy trying to run their home in addition to taking care of children. At a center, you don't have that problem. They're not trying to load the dishwasher, do laundry, get dinner on, etc. while they are taking in your money to care for your child. At a home center, you have that problem.

57% of your take-home seems really high, if your income is high to begin with.

[Logan's Mom]

another thought is you might want to cross post this in the working and student mom's section --- there are often tons of daycare threads...just a thought.

[YesandNo]

If you want to work, then you should. I would not let short-term childcare expense prevent you from doing what you want (short term in that infant care is so much more expensive than preschool and elementary school).

Personally, I view childcare as a shared expense between me and my husband. It's not my burden alone. Our childcare expense is 33% of my income, but only 10% of our combined income. It was reasonably easy for us to cut that 10%.

Basically, though, childcare is the one area of our budget in which I made the decision based on emotion rather than numbers; in this area, that meant $200/week for full-time care even though I could have chosen a lesser situation for as little as $125/week. In my book, top-notch childcare that you feel good about is a #1 priority.

I agree with this. I think that a DCP that comes recommended by a friend and that you have a good feeling about is priceless. I'd splurge on that without hesitation, especially since your financial situation is in such good shape right now.

[caedmyn]

I don't have any idea how to figure out how much of your income childcare should be, but if you really want to use this nanny but don't like the cost, maybe you could look into doing a nanny share with another family if the nanny is willing.

[Ironica]

Originally Posted by mightymoo

Even if the margin between what you make and what the nanny makes is small, I could see spending extra on a full time in home caregiver for the first year or two, then switching to something less expensive as the child gets older. So in that sense, you aren't permanently paying this persons salary, you are doing it for a year or two in order to further your career, etc.

Yes, exactly. I suspect that, after this six months is up, I may very well cut back to part-time hours of my own accord. Also, if DS2 is anything like his brother, he will NEED a preschool-like environment fairly early on (DS1 has incredibly high social needs, which I was completely incapable of filling).

One reason we really haven't looked at daycare, whether commercial center or in-home, is transportation. It'd have to be within a block or so of one of our usual origin/destination points (home, my work, DH's work, DS1's school) to be feasible, and even then it would be quite a hassle and cut into our family's morning time significantly. The logistics of the one-car family in Los Angeles are pretty intense, even when you're careful about making decisions that take it into account. So someone who comes to us is a HUGE bonus (and of course raises the cost, especially given gas prices).

I can ask this woman how she'd feel about nanny-share arrangements. That would make a lot of sense; this neighborhood is crawling with young children ;-). Even being able to split things two days a week (and I'm assuming her rate would be higher on those days) would change the affordability picture a good deal.

I think what we're going to do is basically do a trial basis two days a week, which mesh with her current schedule, so we can find out if it works for all of us before doing anything drastic.

Originally Posted by Logan's Mom

another thought is you might want to cross post this in the working and student mom's section --- there are often tons of daycare threads...just a thought.

Yes, I've browsed the discussions of daycare decisions there, and that's gone into my overall planning, and making the decision whether to try to accept this offer from my work. I specifically posted here for advice on how to make budget decisions, though. Not even whether she's worth it... I'm sure she is... but whether it's a reasonable thing to do.