Smart Ways to Save on Childcare Cost

save and help with childcare costsThe gender pay gap is once more in the headlines following the Government’s attempt to shame the worst offenders after forcing companies to come clean on how much they pay their male and female employees.

Analysts have revealed that women will earn almost £300,000 less than men over their working lives.

According to the Fawcett Society, in the UK today women earn 13.9% less than men. We are all aware of these figures – we hear them a lot.

But why do women earn less than men?

In some cases, the gender pay gap can be attributed to outright discrimination, where a woman doing the same work as a man is paid less – simply because she is a woman.

However, there is one significant cultural factor in women’s slow progress towards pay equality: Motherhood.

In the UK, and indeed in almost every country in the world, women shoulder the bulk of childcare. If a woman takes time out from her career to have a baby, for every year she is absent from the workplace, her future wages will fall by 4%.

For every year a woman is absent from the workplace, her future wages will fall by 4%. Click To Tweet

A motherhood ‘break’ leads women either to return to part-time work (therefore earning less than men), returning in a lower position or changing careers to a more flexible job and starting at the bottom (on the lowest pay rung).

Motherhood has a significant and negative impact on a woman’s earning power.

The National Childcare Trust (NCT) found that for many women, returning to work after having a baby is simply not worth it – as a large proportion of women and families will use their entire salary to cover the cost of the childcare.

So many women, particularly those on a lower income, are effectively working for free.

Motherhood has a significant and negative impact on a woman’s earning power.Click To Tweet

According to the Fawcett Society two thirds of mothers see the cost of childcare as a barrier to them working, and two fifths see it as their biggest barrier.

Let’s look at the facts….

How Much Does Childcare Cost?

Under Twos (per child)*

  • Nursery (full-time): £212 per week
  • Childminder (full-time): £197 per week
  • Live in Nanny: £360 per week plus tax, national insurance, room and board
  • Day Nanny: £512 per week plus tax and national insurance

*These costs would be significantly more in London and the surrounding areas.

Three to Four year olds:

  • All three and four-year-olds can receive 570 hours of free early education or childcare every year (or 15 hours each week for 38 weeks).

The cost of childcare varies greatly by location and type of nursery. For middle-income earners on £30,000 p.a., the cost of childcare (for one child under two) takes up over a third of a yearly income.

How to Save and Find Help with Childcare Costs

save and help with childcare costs For working families, there are a number of schemes already in place to help with childcare costs. When considering your childcare options, a good starting point is to assess your income to see if you are eligible for help with childcare costs in the following schemes:

1. Working Tax Credits (the Childcare Element)

If you are claiming working tax credits you can claim for an extra ‘element’ to cover childcare costs.

You can get up to £122.50 extra per week for one child, or £210 extra for two or more children in extra tax credits.

To be eligible you need to be working a minimum of 16 hours per week and have a total household income (single or joint) under £46,000.

If you earn over this threshold you will not be eligible for any help with childcare costs. Find out if you are eligible here.

2. Free Early Years Education and Childcare

Children are eligible for 15 hours per week (over 38 weeks) of free childcare from the term after their third birthday.

Parents must make up the extra cost of childcare over 15 hours per week. From September 2016, a pilot in some areas will extend this to 30 free hours a week.

3. Childcare Vouchers

Childcare vouchers are given to you by your employer to help pay for childcare.

The vouchers may be offered as a benefit on top of your ordinary pay or, more usually, through a ‘salary sacrifice’ scheme where childcare costs are taken from your pre-tax income.

So, you give up £1,000 of salary, which is worth £700 in your pocket after tax & National Insurance = you get £1,000 of Childcare Vouchers. This means you’re £300 better off per £1,000.

4. Help with Childcare Costs While You Study

You can apply for a Childcare Grant if you are in full-time higher education to help cover childcare costs. The grant can be up to £266 per week for two or more children.

More Tips to Help with Childcare Costs

Consider All Types of Childcare

Some childcare options are cheaper than others: for instance a nursery is cheaper than a full-time nanny. 

Sending your child to a registered childminder can often be the cheapest option of all – childminders do not have the overheads of a nursery.

Paying a family member (at ‘mates’ rates!’) such as a grandparent, to look after your kids is another option for those lucky enough to have family nearby.

Consider Your Working Options

Can you or your partner negotiate to work from home for a few days per week?

Or are you interested in setting up your own business?

Working from home can significantly reduce childcare costs as you can fit your work around when the kids are in bed or napping. You can read our handy guide on how to kick-start a freelance career.

School Holiday Cover

According to The Family and Childcare Trust, over a third of parents find it difficult to find affordable childcare in the school holidays.

The number of parents taking time out or even giving up their job to look after children in the holidays costs the UK economy nearly £100 million each year.

Look for holiday clubs run by schools as they are often cheaper, if your school does not run one you may be able to send your children to another school club. 

Other great ideas to help you save on childcare costs is to choose holiday clubs which offer sibling discounts or even put up an advert in your local further education college – childcare students are often looking for extra work and can charge considerably less than fully-qualified nannies.

However you manage to cover your childcare costs, the fact is that high quality, free childcare is imperative for financial independence and equality for both men and women.

Your Turn…

What are your experiences of paying for childcare? Do you have any other tips you would like to share with us? We would love to hear from you.

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One Comment

  1. What a fantastic post! One of the reasons that I chose to give up work many years ago and become a SAHM was due to the costs of childcare. I was in that horrible bracket that earned too much to get help, but not enough to actually earn anything after paying out.

    I was shocked to see that childminders cost nearly as much as nursery, I always thought that they were the more reasonable option xx

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