There are a lot of things to do and stuff to buy when you’re preparing for a baby. It’s easy to get wrapped up in saving for things like diapers and strollers, but one of the most important things to plan for is childcare. Taking time out of all your baby prep to create a childcare plan will give you a chance to consider whether you want to go back to work, if you’ll need help with childcare from your family, or if you can afford daycare or a nanny. We sat down with Rosanna Guardavaccaro, financial advisor with Guardian and Strategies for Wealth, on the set of a Scary Mommy video shoot to talk about all things childcare.

What factors are there to consider when budgeting for childcare?

A big factor to consider is what kind of childcare you need. Daycare, nannies, and family members will have significantly different costs. For daycare, some of the factors I would consider are how many children need to be in daycare, the prices at the location you’ve chosen, and are you dropping your child off early or is aftercare needed? Also, are you looking to put your children in any after school activities, such as martial arts, sports, dance, art, or gymnastics? These activities all have prices associated with them that need to be considered.

How much money should you set aside each month for childcare?

That will depend on the factors I’ve already shared. But I educate clients to prepare for worst case scenarios and hope for the best. By saving as early as you can and as much as you can, you’ll be better prepared. Keep in mind, it's all about financial balance. Even though childcare is a very important goal, there are other goals to prepare for as well.

What’s something that many parents don’t realize when it comes to childcare?

Normally, childcare expenses are higher than what the parent or potential parent expected. They should also realize they shouldn't start saving when they’re pregnant with a child or after the child is born. They should start saving before. Similar to when you’re purchasing a home, you don't start saving once you find the house that you would like to purchase, but you start saving way in advance so you can purchase the home you want.

So when should you start saving for childcare?

I'm a firm believer that you should always be saving for both long-term and short-term goals. Those savings can be used towards various buckets such as childcare or even a rainy day. As discussed in my children's book, Peter Saves for a Rainy Day, educating and saving at an early age is so important.

What is more economical: an in-home caregiver or daycare?

Costs will vary and it really depends where you live. Also, it may not always come down to cost. Which setting are you most comfortable with — a single person watching your child in your home or a group of caregivers in a school setting? That decision depends on the age of the child and the needs of the family and child. As the child gets older, there might be a combination of childcare services.

What government assistance is available to help pay for childcare?

Some states offer childcare subsidies. However, keep in mind that there will be income requirements that cannot be exceeded to participate. I suggest doing a search online of what your state offers.

What is the Child and Dependent Care Credit? How do you qualify?

It’s a small credit the IRS gives if parents work and kids are in after-school programs or private school. If you paid a daycare center, babysitter, summer camp, or other care provider to care for your child, under age 13, the child and dependent care credit may provide a tax break for you. The child and dependent care credit is designed to assist working parents and guardians with some of the expenses involved in raising a child. However, the credit varies depending on your earned income, and is based on the expenses paid to provide child or dependent care services so that parents can work. This may reduce the amount of federal income taxes due, which can in turn increase your refund. However, I suggest discussing this credit with your tax consultant.

How do I calculate if I should stay home or go back to work and pay for childcare?

The best way to figure out whether you should stay home or pay for childcare is to complete a cash flow worksheet, including your income or potential income and include your childcare expenses.  Just remember to slightly over inflate what you would think childcare expenses would look like. If the additional childcare expenses add up to more than you would make at work, you might want to think twice about going back to work. If you’ll bring in more than childcare will cost, determine if the surplus is worth going back into the work force.

After weighing the pros and cons, what if it makes more financial sense for me NOT to work? How can I manage my finances?

This is why saving early for long-term needs is very important. By starting to save early, you give yourself the power to make different decisions. This also gives you the opportunity to have other investment options to choose from.  So along with your savings, you could also have the potential for growth with other investments. Work with a financial professional who can help you plan for childcare and other costs.


Rosanna Guardavaccaro is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 120 Broadway, 37th Floor New York, NY 10271. phone: 212.701.7900. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly-owned subsidiary of Guardian. Strategies for Wealth and Scary Mommy are not affiliates or subsidiaries of PAS or Guardian. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. 

Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. This material contains the current opinions of Rosanna Guardavaccaro but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice.

Excerpts have been taken from a longer interview conducted by Scary Mommy.

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