The Myth about Childcare Costs for School-Aged Children
Caitlin Fastiggi,
CFP®, CPWA®, ECA
DIRECTOR OF FINANCIAL PLANNING
As a financial planner, I’ve worked with many clients who are parents of younger children.
I’ve recognized a common theme: most parents believe that costs immediately decrease when children enter the public school system.
Spoiler alert, this is not true!
With my son entering Kindergarten this year, I have a first-hand perspective of what this looks like.
Comparing Childcare Costs Before & After They Start School
I can now compare my daycare costs to my school-age childcare costs.
My previous daycare ran from 7:30 a.m. to 6 p.m., five days a week, with minimal closures.
My son started kindergarten a few weeks ago. His school day goes from 9 a.m. to 4 p.m., so it is 3.5 hours less than our previous coverage and shorter than a typical work day.
This is typical and means that most households with two working parents have to add extended care or a nanny to cover this additional time.
Public schools are also closed more which means there may be additional childcare needs to cover these days as well.
Since most schools don’t run 12 months a year, parents most likely need to pay for summer camp. Most day camps run 8 weeks so typically parents have 2-3 weeks each summer without school or camp. Since most day camps have similar hours to schools, again, parents need to add extended care or a part-time nanny.
In my case, for just extended care during the school year and summer camp with extended care, I will still be paying 73% of what I had been paying for daycare.
This doesn’t include 17 additional days of school closures, 8 additional half days, and 2 weeks in the summer between school and camp.
Using the rate for my local childcare drop-in for these days, I may still be paying 90% of my daycare expenses.
And this is before you add in the cost of extracurricular activities which start to increase once kids hit school age.
The reality is that while overall expenses may decrease slightly, it is inconsequential. Not nearly what most people expect.
So I’m officially putting a rubber stamp of “MYTH” on this idea that you can anticipate a significant drop in childcare expenses once your child reaches school age!
Tax Savings with a Dependent Care FSA
While the costs may not decrease significantly, there are still some tax savings to be had. Even when your child reaches school-age.
Until kids turn 13, a Dependent Care FSA can be used for extended care and summer day camp expenses, allowing parents to save a modest amount on taxes.
It's important to note that the Dependent Care FSA can be used for various childcare expenses, including:
After-school care
Day camps during summer and school breaks (overnight camps do not qualify)
Drop-in childcare for school closure days
By taking advantage of a Dependent Care FSA, parents can set aside pre-tax dollars to cover these expenses, potentially reducing their overall tax burden.
What This Means For You:
While your child’s transition to school is a big milestone in your family life (Yes, I definitely shed some tears!), your expenses will not change that much.
It’s important for parents to realistically anticipate and budget for the reality of ongoing childcare costs.
