COVID-19 has wreaked havoc on nearly every aspect of physicians’ lives—jobs, relationships, personal fulfillment—and now, childcare.
Procuring quality, affordable childcare has only become more challenging for families throughout the pandemic. In fact, the annual Care.com Cost of Care Survey unearthed that 85% of parents reported spending 10% or more of their household income on childcare alone—and the federal definition of “affordable” is no more than 7%.
With all the demands on a physician’s time, those with children often rely on a stable childcare source for their daily lives. But with childcare costs climbing higher and higher, how can doctors intentionally budget for this expense and select the option that’s best for their family?
Today, we’ll look at four leading options physicians can consider for childcare.
1. Hire A Nanny
Many dual physician couples find that hiring a nanny can be an excellent avenue for childcare. You could decide to employ the nanny full-time or part-time to care for your children while you and your partner are at work. It can be a great comfort to know that you have a dedicated person watching out for your child’s wellbeing while you’re off saving lives!
How much does a nanny cost?
The Cost of Care survey revealed that the average expense of a nanny for one child was $15.30 an hour or $612 per week— an increase of about 8% in the last year. If you want to hire a nanny full-time all year, you’re looking at about $31,824.
That’s just for one child.
Your bills could dramatically increase if the nanny is responsible for more children. Typically, their hourly rate increases by $1 to $2 an hour for every additional child under their care. Using that benchmark, a family with three children could shell out over $40,000 in just salary costs (not taxes or other incentive-pay). This cost can be higher depending on location, we have clients in Nashville and Los Angeles paying even more than this for their nanny.
Additional Nanny Expenses
But the list of expenses travels far beyond salary, and you’ll have to consider the following:
- Social Security and Medicare taxes, 7.65%—if you pay them more than $2,300.
- 6% federal unemployment tax (though you may be eligible for a 5.4% tax credit) on the first $7,000 in wages if you pay them more than $1,000.
- Potentially state unemployment tax. The rules are state-specific, so check with your area.
- Professional tax preparer/CPA to help navigate the tax requirements for employment
Now that we’ve covered the basic salary and taxes you could expect to pay, we can consider other items.
- Transportation. Will your nanny be responsible for taking your kids to activities, school, lessons, etc.? If so, will you provide them with the vehicle or reimburse them for gas, miles, etc.?
- Incentive pay. Will your nanny get a bonus? What’s considered overtime, and what rate will you pay?
- Time off. How will you account for childcare costs when your nanny is on vacation? You might look into a part-time babysitter. Regardless, it’s good to have a backup plan if your nanny is sick or “out of office.”
Hiring a nanny can be a fantastic solution if both spouses work full-time. Some couples even consider bringing in a part-time nanny if one spouse stays at home, and doing so can be a significant source of relief for the stay-at-home parent.
2. Find a Wonderful Daycare
Daycare may have been a costly, though potentially viable option in pre-pandemic times. But data from The Center for American Progress and analyzed by Care.com found that daycare costs increased by 87% in 2020.
How did we get there?
The total cost you’ll pay for center-based care depends on how many kids you have, how old they are, and where you live. In general, care will be more expensive the more kids you have, the younger they are, and if you live in a high cost of living area. For example, childcare in downtown Nashville will likely be more expensive than in rural Indiana.
Pricing for Center-Based Care
Center-based care often has tiered pricing:
- Infants—the most expensive
- Toddlers—the middle ground
- Pre-school aged—the least expensive
In 2019, Childcare Aware America discovered that the average cost for center-based daycare for a toddler was $182 per week. But in 2020, the weekly cost ballooned to $340 a week or $17,680 a year.
As you can see, sending your child to daycare can be far less costly than hiring a full-time nanny. But that statement most often rings true when you have just one child. If you have multiple children, the price difference between a nanny and center-based care becomes more minimal.
On average, you’d pay a daycare center $640 a week for two toddlers, whereas you’d pay a nanny about $654 a week. While that $14 difference may add up over time, it could be worth it, depending on your family’s needs.
Plus, the pandemic hit daycares hard. There are now more “daycare deserts” (aka mismatch in supply and demand) than ever before. Many daycare centers closed their doors in the pandemic; some have only re-opened part-time and don’t have the staff to care for the same number of children as before. Inflation also has spiked prices, leaving childcare much more unaffordable.
It’s also important to note that daycares tend to have strict hours, so if you and your partner have to be in the O.R at 4 am, you may not be able to solely rely on a daycare for your childcare source. Daycares are often more strict about sickness as well, and if your child is visibly sick, even with a stuffy nose, they will likely send them home. Be sure you know the rules and have a backup plan.
3. Work With An Au Pair
No, au pairs aren’t just starry-eyed young adults traipsing around a foreign country with your kids—this isn’t a Hollywood movie.
An au pair is typically a person in an international cultural exchange program who lives with your family and cares for your child. While less common, au pairs can make a solid temporary childcare solution. Most au pair contracts last about a year, though you can apply for an extension depending on which service you use.
Hiring an au pair is quite different from a live-in nanny. There are a few cost and procedural differences to keep in mind.
- Program fees. Many au pair programs come with several fees, like program fees, registration fees, minimum weekly stipends, and more. Cultural Care Au Pair estimates host families will pay about $19,500 per year. Another popular program, Au Pair in America, costs about $20,000 for the 2022 program.
- Working hours. Au pairs have set working hours based on the program, and they aren’t super flexible. With a nanny, you have more control over the hours worked.
- Visa. Your au pair will need a visa, which just requires more processing and paperwork.
- Language courses. The au pair must have access to language courses should they want it, and those course fees tend to fall on the host family’s shoulders.
If you’re interested in participating in a cultural exchange program and feel like that experience could enrich your family and your children, an au pair program could be a good fit. It may be beneficial to wait until your children are old enough to truly appreciate the cultural component of this arrangement.
We have a number of dual physician couples who have found au pairs to be an excellent solution for them, and more affordable than a nanny as well!
4. One Parent May Want To Stay At Home
Since the pandemic, the percentage of parents staying at home with their children has increased by 60%. While reasons vary greatly—financial need, job loss, lack of childcare, personal desire, etc.— the fact is that staying at home can be a rewarding and fulfilling experience for the right person.
While fulfilling, staying at home with the kids is one heck of a job. Salary.com estimates that based on the average hours worked (106 a week) and duties performed (over 20 different positions), the median salary for a stay-at-home parent should equate to $184,820.
Stay-at-home parents bring so much value to the family and could potentially save you thousands of dollars in living costs. Keep in mind that moving from a dual-income household to a single-income household may come with additional financial planning considerations like retirement savings, insurance coverage, cash flow planning, and more. Our team can help you analyze the numbers to see if this situation could make sense for you.
While you’ll likely save money on childcare costs when one parent stays at home, that doesn’t mean they’ll disappear completely. Some families benefit from a part-time nanny or babysitter for the parent at home if they get sick, have to run errands, have different appointments, or just need a second to themselves.
We Can Help You Include Childcare Into Your Cash Flow Plan
Every family’s childcare needs are different, and many physicians work non-traditional hours, leaving them to combine childcare solutions.
We want to help you use your money in innovative ways that make your life better! Let’s take a look at your cash flow plan and map out some childcare options that could be feasible for you. We can also help you look at how these costs can morph into education savings over time as your children grow and you find yourself spending less on childcare in the future.
Set up a call with an advisor today!
Investment advisory services offered through Vestia Personal Wealth Advisors, Vestia Retirement Plan Consultants, and Vestia Advisors, LLC. Securities offered through Ausdal Financial Partners, Inc., 5187 Utica Ridge Rd, Davenport, IA. 52807 (563)326-2064. Member FINRA/SIPC. Vestia Personal Wealth Advisors, Vestia Retirement Plan Consultants, Vestia Advisors, LLC, and Ausdal Financial Partners, Inc. are independently owned and operated.
This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor. This information is not an offer or a solicitation to buy or sell securities. The information contained may have been compiled from third-party sources and is believed to be reliable.