Childcare Is Expensive—Here Are 9 Ways to Lower the Cost

During those first few years years, childcare is often one of the largest costs in a family budget. From infant daycare up through pre-K, the vast majority of options are going to cost money. Even being a stay-at-home parent isn’t free—it costs you energy and brain space due to the extra mental load, not to mention the lack of extra income.

And with the cost of raising a child being higher than ever before, it’s extra important for families to understand all of their options for keeping childcare expenses as low as possible. Financial assistance programs and more affordable childcare options can ensure your family gets high-quality support without breaking the bank.

How much does childcare cost?

While it’s never really been inexpensive, the cost of childcare has risen significantly in the last several years, increasing nearly 20 percent since 2016. The average cost of one year of daycare was between $8,310 and $17,171 in 2022, and you can bet those numbers will only get higher in 2024 and 2025. In some areas of the US, like Washington D.C., families are forking over an average of $25,000 a year for center-based daycare, according to LendingTree’s latest data.

Another common childcare option is to hire a full-time nanny, but the benefit of individualized care comes at a much higher price. Employing a nanny at $15.76 an hour (the national average in 2024) for 40 hours per week has an average cost of about $32,800 per year.

Financial assistance programs to lower the cost of childcare

Financial assistance programs vary by state and employer, but it’s worth a look into what you might qualify for.

Government subsidies

Depending on where you live, there may be government programs that can help cover some or all of your childcare expenses. You should check with your local government or social services agency to see all the available options, but these nationwide programs are likely available where you live:

• Head Start programs: The Early Head Start (ages infant to three years old) and Head Start (ages three to five years old) programs are designed to provide high-quality early childhood education and development services for young children from low-income families. These programs also offer other comprehensive services like home visits, health services, nutrition counseling, parent education and services for pregnant people.
• Universal pre-K: Some states offer free pre-K with varying eligibility requirements. Check to see if state-funded universal pre-K is available to you (and what you need to be eligible).

Employer-sponsored Dependent Care Account

Some companies offer childcare benefits such as a Dependent Care FSA (DCFSA). “If your job offers a dependent care flexible spending account, this can allow you to use pre-tax dollars to pay for eligible dependent care expenses,” says Kendall Meade, certified financial planner at SoFi. “The contribution limit for 2024 is $5,000, which is likely less than what your true costs are, but depending on your tax bracket that could save you over a thousand dollars on taxes.”

Tax Credits

Speaking of taxes, once tax season rolls around, you can use the Child and Dependent Care Tax Credit to get some money back for the previous year’s childcare costs and to help offset future childcare expenses.

It’s available to taxpayers who need childcare in order to work, look for a job or attend school full-time and have an adjusted gross income of less than $438,000. The credit gives you up to $4,000 for one qualifying dependent and up to $8,000 for two or more qualifying dependents. To claim it, you’ll need to fill out Form 2441 when filing your taxes (make sure you keep all your childcare receipts!).

Affordable child care options

While daycare centers and nannies have historically been the most well-known childcare options in the US, they’re not necessarily the most cost-effective for families on a budget. Here are some childcare options that provide the same level of high-quality care but typically cost much less:

Co-op Daycare

A co-op daycare (also called a Parent Participation Nursery School, or PPNS) is a less expensive yet similarly structured alternative to a traditional daycare center. Co-op daycares and preschools are able to keep tuition costs lower by relying heavily on volunteer help from parents. Depending on a co-op’s individual structure, parents typically rotate working alongside certified daycare teachers in half-day shifts, taking turns caring for each other’s children.

All of the parents in the co-op share the responsibility and cost of running the daycare, including some parents acting as members of the board of directors. Keep in mind that most co-op parents put in about four to eight hours of volunteer time per week, so this may not be a viable option for parents with limited work flexibility. Aside from the lower cost, a key benefit of parent co-ops is the close interaction you get with your child and their classmates.

In-Home Daycare

In-home daycare is another less expensive alternative to center-based care that has most of the same benefits, including structured schedules, socializing for your child and the peace of mind of having a licensed provider taking care of your little one. The key difference is that in-home daycares are operated out of a private home, so they’re much smaller and accept fewer children (usually about 10 to 12, fewer if there are young infants). The smaller size allows them to offer lower tuition rates, flexible hours, a smaller adult-to-child ratio for more individualized care and more close-knit interactions between parents and staff.

Nanny Share

Nanny sharing is exactly what it sounds like: two or more families split the cost of a full-time nanny, who either works out of just one family’s home with all children present at once or splits their time between locations. Nanny shares are most often coordinated through local and online parent groups, and you may be able to join a nanny share already in progress.

Free or Low-Cost Community Programs

Depending on your child’s age and needs, there may be free or low-cost programs offered by your local community centers, libraries or recreation department. Many churches or other religious organizations offer low-cost childcare services as well. Depending on your church or faith, they may provide daycare, preschool, after school care and even summer camps.

Family and Friends

If you’re lucky enough to have family and/or friends nearby who are willing and able to help out, they’re often going to be your most affordable option. Having someone you know and love take care of your child can bring peace of mind, but don’t hesitate to require that they take a child CPR class or refresh their memory on baby care just to be extra safe.