It’s the light at the end of the tunnel for many working parents, a day they look forward to and possibly even countdown to as the moment draws closer. What is it? It’s the day you get to make your last daycare payment.
There’s a reason this is such a big deal to many working parents. It’s not uncommon for the cost of childcare to exceed a mortgage payment, especially when you have two kids in daycare full-time. According to this CNN article, “In 33 states and DC, a year of infant care is more expensive than a year’s tuition at an in-state college. In Washington DC, the average annual cost for infant care is 27% more than the average rent in the city.”
So we’re not talking small chunks of change.
If you recently dropped your childcare payment, especially if it’s because you will have a child entering public school this is cause to celebrate. But (and you know where this is going), we say budget, then celebrate.
How to Budget When You Child is Done with Daycare
Preschool – especially full-time preschool – can easily cost hundreds of dollars, with the average in major metropolitan areas easily exceeding $1,000 a month. It can feel like a financial windfall to suddenly have an extra grand in your pocket. That amount of money will certainly put most people in a better place with their finances. It’s like getting a raise, minus all of the hard work and performance reviews.
But don’t think of that money as being all yours for the taking. Kids are expensive and even though you may not have a hefty preschool payment, you’ll likely have some new expenses creep up that you didn’t have before. Even public school isn’t free.
Here are a few expenses to factor into your budget:
After school care
The school day in most districts ends before 5 p.m. If you’re working full-time and don’t leave work until five, you’ll likely need after school care for those hours every day between when school ends and you get home from work.
Childcare could be a nanny, a neighbor, or maybe an afterschool program at your child’s school. Either way, there’s usually a cost associated. And while it’s not going to equal full-time daycare, you still need to factor it in your budget.
School registration fees and expenses
When your child starts school, even if it’s a public, you’ll have school-related expenses where maybe you didn’t before. Those fees might include registration, a long list of classroom materials and supplies, or a school uniform. It’s possible that the amount you would have spent on a week or month of daycare could get eaten up by back-to-school expenses.
Lunches and snacks
Some preschools offer food throughout the day which is built into the cost of tuition. Once your child enters school, they may be on their own for lunch. Which means your grocery bill is likely going to increase, not to mention after school snacks. Kids after school can be ravenous and most have the capability to eat their weight in granola bars. But even if your kid goes to a public school that offers free lunch and breakfast, they might not want to eat it. So there’s definitely no such thing as a free lunch. Shout out to all the moms who are packing lunches every day for picky eaters! The struggle is real.
Summertime and Day Camps
School’s not a year-round thing so when school’s out for summer, who’s watching your kids? The same goes for winter breaks, spring breaks and the random teacher in-service days that happen throughout the year. You’ll still need to factor in those childcare expenses throughout the year.
What To Do with All that Extra Money
The good news is these expenses still are not likely going to add up to the cost of full-time daycare, so you will have a cushion in your budget that you previously didn’t. So what are you going to do with it?
Our advice, do something before it gets eaten up by everyday expenses.
Just like getting a raise at a job, if you’re not careful that new money can feel like money you’ve always had (and now can’t live without) once you let it hit your checking account a few times.
While you’re still paying your daycare payment, you should have a plan for that money once that payment is gone. This is a good excuse to revisit your budget or have a budget meeting with your spouse. Ask yourself (and your spouse), what is its best use?
Typically with coaching clients, we have them make a list of all the things they want to do. We then have narrow it down and choose which item they want to fund based on their priorities. We start with a massive list but usually have to narrow it down to one goal. Typically, the change in their unallocated income isn’t enough to fund everything they want to fund, so we still need to prioritize.
If you’re working to pay off debt, you might want to take this extra amount and throw it toward debt to eliminate it sooner. Or maybe you’re looking to add something to your budget that previously wasn’t possible. If you’ve always wanted to take a family trip during spring break, but it wasn’t in the budget, maybe this extra income goes to a savings account earmarked for a family vacation. The choice is yours. But definitely make it a conscious choice otherwise your lifestyle may claim that money for you.
To help you make sure you’re putting your money where your goals are, ideally, you want to set up payments or transfers ahead of time. Make sure whenever that payment for daycare would have hit, that you’ve got another payment or transfer in its place. So if you pay for daycare on the first of the month, and August 1 is your last daycare payment, set up an auto-transfer for Sept. 1 to fund the goal of your choosing.
Don’t let yourself feel what it’s like to have this extra money in your account. Know you’ve got a plan for it. And now you can celebrate because you’re done paying for daycare and you’re not going back.
Need help navigating kids and money? Check out our other Carmen’s Corner blog posts.