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How to manage your childcare costs

Posted 31 August 2016

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5 handy tips to keep the cost of childcare under control.

Are you struggling to pay for your childcare? Or are you about to have a baby and worried how you’ll cope when you return to work and need to someone to look after the little one? Childcare is an unavoidable cost for lots of parents up and down the country but – as always – there are ways of keeping this cost down and making sure that your money goes as far as possible. 

How much does it cost?

The average cost for childcare for children under the age of two is £115 per week for part-time care and £212 per week for full-time care, according to the Money Advice Service. As you can see, this has the potential to take a significant bite out of your budget. This varies of course from region to region and depending on the type of care that you require – a registered childminder for instance will be more expensive. 

Is there any way to cut the cost?

Yes is the answer to this question. Here are some ideas you can try. 

1. Ask grandparents and friends for help

Grandparents are usually very willing childminders and getting a bit of help from any trusted family member is always a good idea and bound to be cheaper. Grandparents may be able to help you to a certain degree for no cost at all. If you do want to pay your mum or dad for their help, then technically they will become your employee and this will have tax implications. But if you just agree to pay their expenses, they won’t be considered your employees. 

See whether you can come to an agreement with your parents or another family member or a trusted friend to help you out with childcare. Even if they can only help out for some of the time you need childcare it’s likely you’ll see a big reduction in costs. This way you get to make a saving and the grandparents get some precious grandchild quality time. 

2. Free childcare

Make sure you make the most of free, early years childcare. The way this works depends on where you live, so for England 3 and 4 year olds can get 570 free hours of free childcare or education in a year. So one option is take this as 15 hours per week for a period of 38 weeks. The entitlement is slightly higher in Scotland with 600 free hours of early learning and childcare for 3 and 4 year olds each year. It’s slightly lower in Wales with 3 to 4 year olds entitled to 10 hours per week of free education for 38 weeks. In Northern Ireland the same age group gets 12.5 hours of free pre-school education for the 38 weeks. 

It’s up to you whether you use these free hours for nursery classes, playgroups or registered childminders. Just bear in mind that only certain childminders who are registered with an approved childminding network that can participate in this. 

3. Work around your childcare

Did you know that parents and grandparents have the legal right to at least request flexible hours if they have a child or grandchild under the age of 16? If you’ve been working for your employer for over six months you should have a conversation with them about how you need to structure your working week to accommodate your little one. You might find that changing your hours means you don’t need as much childcare as you originally thought, or that you just need a grandparent or friend to help out for a few hours here and there. 

If both you and your partner asked for more unusual working hours you might be able manage to child care between the two of you without relying on anyone else at all. How well this works for you will depend on the type of job you do and whether you or your partner work full or part-time. It’s definitely worth having a sit down with your boss and working out what works best for both of you. 

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4. Look into childcare vouchers

You should be able to get childcare vouchers from your employer one of two ways. They are sometimes an additional benefit that your employer will give you on top of your salary, or you can choose to sacrifice part of your salary and get the vouchers instead. 

The advantage of doing is this is that the vouchers are tax-free and you don’t have to pay national insurance on them, whereas if you simply received that money in your pay packet as normal it would be subject to tax. So there are some situations where you’ll be better off financially by choosing to sacrifice some income for the vouchers. 

How much you get depends on how much tax you pay. If you earn between £11,001 and £43,000 it means that you pay tax at the base rate (20%), and you can get up to £243 a month. If you’re a higher rate taxpayer you’re entitled to £214 per month and if you’re an additional rate taxpayer you’re entitled to £110 per month. 

Contact your employer if you want more information about this scheme, or use this calculator to find out if you’re better off with the vouchers. 

5. Claim your benefits

Don’t forget to look into all the benefits you might be entitled to, as these can go a long way in helping you afford the childcare you need. 

All parents are entitled to Child Benefit regardless of what they earn as long as they are responsible for a child under the age of 16 or under the age of 20 if the child is still in full-time education. Go to this Government page to find out how apply. 

You may also be entitled to Tax Credits and Child Tax Credits depending on how many hours you work and how much you earn – these benefits are designed to help people on low incomes. If you qualify for Child Tax Credits this won’t affect how much you get in Child Benefit. 

We hope this blog has helped if you’re worried about how you’re going to afford your childcare. Make sure you check out the rest of our money saving section for more tips on how to save money if you’re having a baby as well on all areas of life.

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.