4 Things to Do to Financially Prepare for Child Care Costs
“I think child care is one of the biggest line items nobody budgets for or plans for early enough.”
In This Article
Preparing to pay for child care is one of the most significant—and often underestimated—financial steps new parents face. In the months leading up to a baby’s arrival, much of the focus rightfully tends to center on immediate needs like diapers, nursery items and medical costs. But for many families, the largest ongoing expense comes when parental leave ends as child care costs can easily reshape a family’s budget almost overnight.
In the United States, one in five families spend more than $30,000 on child care expenses per year, according to the 2026 Cost of Care Report from Care.com. Though the annual cost of child care varies greatly by location, data from the Economic Policy Institute found that child care for one infant is more expensive than public college tuition in 38 states and Washington, D.C.
“I think child care is one of the biggest line items that nobody budgets for or plans for early enough,” says Laura Combs, executive managing partner at wealth management firm Mercer Advisors. “It's like it just shows up one day, and you’re like, ‘Oh, I'm back to work, and I have another mortgage payment.’”
That’s why she says financially preparing for this major life expense should begin well before a baby arrives. From researching your options early to maximizing employer benefits to setting aside a dedicated fund to save for these costs, here are a few ways in which parents can approach this big expense with greater clarity and less stress.
1. Understand Your Options
Beyond researching the average costs of child care in your area, it’s important to know there are many different care options available. It’s helpful to do your research and decide early which option best fits your needs.
Parents have a few choices—daycare center, in-home daycare, nanny, or a nanny share, where multiple families split the cost—and they can range in price.
“It’s about understanding the options, what's available, and what are the pros and cons [of each],” says Combs, who is a mom of six and says she’s used a variety of child care providers over the years. “It’s really about finding a child care option that is going to be right for your family.”
2. Take Advantage of Employer Benefits
In addition to researching the best options available to you, it’s important to reach out to your HR department to get a clear understanding of your company’s parental leave policy and any benefits offered that can help reduce child care costs.
You’ll want to know how many weeks of parental leave your job provides. This allows you to know how much time you have with your baby before you need to start paying for child care.
Many larger employers offer child care-related benefits. Make sure to ask HR if there are any subsidies or stipends that help cover costs. Are there any backup child care programs through your employer that you can take advantage of? Does your job offer dependent care FSA where you can use pre-tax dollars to cover child care expenses?
Checking in early with your HR team is critical as some of these benefits may require advance enrollment.
3. Create a Dedicated Savings Fund
Once you’ve narrowed down the care options that work best for your family and priced out what it will cost you, it can be helpful to start saving for that additional expense.
Create a dedicated savings account a few months before the baby arrives where you make consistent contributions. If you want to test run how this new expense will impact your overall budget, you can start setting aside the full monthly cost of child care into the savings account. Not only does this get you into the early habit of treating this expense like a fixed monthly bill, but it also provides you with a necessary financial cushion that can make a huge difference to your budget down the line.
4. Build Flexibility Into Your Plan
When planning for child care, it’s important to know there is no one-size-fits-all model and that child care needs will change over time, from costs shifting as your child gets older to the type of care you need if your income and work schedule fluctuates. It’s helpful to remember that the goal when planning for child care isn’t to achieve perfection, but rather to create a plan that allows you to save and prepare early in order to reduce financial stress and have control over your options.
“Financial stress in these scenarios generally comes from surprise expenses,” says Combs. She emphasizes that early research and intentional saving is key to making these payments feel less like a burden.
