So You Think You’ll Save Money When Your Child Starts School

Daycare is expensive! 


According to the National Association of Child Care Resource & Referral Agencies (NACCRRA), the average cost of center-based daycare in the United States is $11,666 per year ($972 a month), but prices range from $3,582 to $18,773 a year ($300 to $1,564 monthly).  To put that in perspective US News and World Report shows for many the cost of a 4-year-olds child care exceeds the annual cost of a 4-year in-state public college tuition.


Our clients with small children often comment, “We’re looking forward to being able to save more money when our first child gets out of daycare and starts public school.”  But it’s not uncommon for people to be surprised at how much they actually save.


To begin with, most families with multiple children pay more for the younger children than for the older ones because most daycares raise their fees for the incoming class every year.  This creates a situation where discounts are disproportional, so if you have two children and your older one starts school, you will not see a 50% reduction in your bill. 


For example, if you are being charged $800 a month for your oldest child and $1,200 a month for your younger child, you may think, “I’m paying $2,000 a month for child care.  That means I’ll only be paying $1,000 when the older one leaves.”  But that’s not what will happen; you will still be paying the same $1,200 for the younger child. 

To compound the situation even further, many daycares offer discounts for multiple children, so the discount goes away when the older child leaves.  For instance, if you have been receiving a 10% discount for the child you’re being charged $1,200 a month for, your bill for that child will go up to $1,333 a month when he is the only one left in daycare. 

As any parent with a child in public school will tell you, there is no such thing as a “free” public education.  It simply does not exist.   What your child eats is included in daycare tuition, but school lunches are not free, and that’s just the beginning of what they’re going to ask you to pay for.  The older your child gets, the more money the school will ask for; field trips, sports, club memberships, and other extra-curricular activities can cost quite a bit.


Finally, households with two working parents will still have after school and summer care to pay for.   You should expect summer camp to be considerably more expensive than daycare. 


Of course with the extreme costs of daycare, you can expect some savings when each child graduates daycare, but I warn you not to build your plan around saving more than will actually occur.

Marshall Rathmell

Marshall Rathmell

Marshall Rathmell CFP®, CPA/PFS is the CEO, Shareholder and Financial Planner with BCR Wealth Strategies.