How to save on childcare costs

With many childcare centres expected to raise prices soon, how can families save money? Canstar reports.

Many childcare providers who typically increase their fees in July are anticipated to bring forward price hikes to March or April, offsetting a boost to the Child Care Subsidy that’s due soon. So, why are childcare costs spiralling and how can you save?

What’s happening with childcare costs in Australia?

High rents, strong demand and staff shortages are contributing to childcare fees soaring nationally, with Australian Bureau of Statistics (ABS) data showing prices rose 6.5% on average last year, in an increase well above inflation.

“KindiCare, for example, expects to see higher fee increases in 2022 compared to the last two years and most parents can expect to see the daily cost of their childcare service increase between $5 and $10 per day this year before the childcare subsidy is taken into account, particularly in those areas where demand for childcare is the highest,” said Canstar’s Editor-at-Large, Effie Zahos.

Ms Zahos said higher fees will leave some parents with important decisions to make, such as when to return to work.

The Parenthood, which represents 75,000 parents and carers nationally, said the early learning sector is at a crisis point. As well as increasing fees, there are record staff shortages and vacancies, and reduced capacity due to room and service closures related to Omicron.

Georgie Dent, Executive Director of The Parenthood, said media reports of ASX-listed childcare provider G8 increasing fees by 4.5% are a “dire warning” of the pressure in the early learning system.

“Australian parents already pay some of the most expensive out-of-pocket costs for childcare in the world, so another 4.5% jump in fees when childcare costs have risen by 6.5% over the past year is utterly unaffordable,” said Ms Dent.

“Early learning services right around the country are under enormous pressure.”

What does childcare cost in Australia?

The latest report by KindiCare suggests Australians pay $117 on average in long day care fees, with ACT residents paying the most at $125 a day, and Tasmanians the least, at $99 a day, on average. Here is what long day care costs in Australia on average on a state and territory basis:

Average Australian long day care costs

• ACT: $125
• NSW: $117
• NT: $104
• Qld: $113
• SA: $114
• Tas: $99
• Vic: $122
• WA: $116

Source: KindiCare, November 2021.

What impacts childcare fees?

What you pay in childcare could vary widely, depending on factors such as the type of care that’s needed, where you live and how many children you have who aren’t yet at preschool or starting prep. Care for kids, a website established by working parents, has cost estimates for families, including for using long day care (such as at a childcare centre), a nanny, nanny sharing, family day care, in-home care, babysitting services or hiring an au pair. Keep in mind what you pay in childcare fees doesn’t necessarily relate to quality, as services factor in costs such as labour and rent with pricing.

“Do not believe that because you are paying more in childcare fees that you are getting better quality,” said Ms Zahos.

What is changing with the Child Care Subsidy in Australia?

From 7 March, a higher Child Care Subsidy (CCS) will apply for eligible Australian families with more than one child aged five or under in care. These families will get a higher subsidy for their second child and younger children, and the standard CCS rate will apply for their first child. Families need to earn less than $354,305, and their eligible ‘higher rate’ children will receive a 30% higher subsidy, up to a maximum of 95% depending on their income and other circumstances.

Ms Zahos said about 200,000 families will see an average of $2,200 extra in their pockets due to the changes, which follow the Australian Government removing the annual cap for all families earning over $190,015 from 10 December, 2021.

10 tips to reduce childcare costs

Here are 10 tips that could help reduce childcare costs:

1. Compare child care options. Visit the Starting Blocks website to shop around.
2. Calculate your Child Care Subsidy. As well as Services Australia’s Payment and Service Finder, KindiCare’s Childcare Subsidy Calculator could help with this.
3. Do up a budget. Could you reduce other out-of-pocket expenses for your family?
4. Ask your support network. Could a family member or friend help out with childcare?
5. Think outside the box. Childcare options such as nannies, nanny sharing, family day care, in-home care, babysitting services or hiring an au pair could work out cheaper than a childcare centre.
6. Read the fine print for a childcare service before you sign up, and know the terms and conditions, including any fees and charges that may apply if you need to cancel.
7. Choose a high-quality childcare service based on National Quality Framework (NQF) ratings, to help your child learn and develop well and get better value for money. The National Quality Standard (NQS) sets benchmarks for early childhood education and care.
8. Weigh up the price of childcare closer to home versus closer to work. If you live in the suburbs, childcare may be cheaper there than if you opt for an inner-city service, where rent could be factored into the prices you pay.
9. Consider carpooling with other families to reduce the costs of petrol on the way to and from childcare.
10. See if you can work from home, and work more flexible hours. With COVID-19, the child care sector has changed in Australia, but so has working life for many of us. Research from the Australian Institute of Family Studies shows Aussie parents are striking a balance between work and home life. Talking to your employer about a work-from-home arrangement that fits in best with your family could help you improve your work–life balance, and save cash too.

→ Discover back-to-school subsidies and rebates

How can you compare childcare costs?

Families can visit the Australian Government’s Starting Blocks website (formerly Child Care Finder) to find local childcare services, view vacancies, compare costs, and check official quality ratings, including safety. The website includes a search tool where you can find childcare services based on your postcode, and narrow results based on the service type, service rating, session type and days you are looking for, along with the age(s) of your children and different types of vacancies. KindiCare and Toddle are comparison websites you may find helpful too, with subsidy calculators and tools to search for providers and calculate savings.

How do people afford daycare?

Having a budget can help with affording daycare or childcare services. Knowing your incomings and outgoings, even for small everyday expenses, can make a huge difference. There are a number of budgeting and savings apps you might find helpful, including the Canstar app, powered by Frollo. Take the time to compare options and see if you can negotiate on price with a provider or service. You may also find it helpful to seek professional advice from a financial adviser or registered tax agent to maximise rebates, offsets and benefits you and your family may be eligible for.

How much should you spend on childcare?

How much you decide to spend on childcare is a personal decision. Think about how much you want and need to work, how much you earn, your professional and personal responsibilities and what could work best for your family. You might decide, for example, to pay a higher premium and use an inner-city long day care centre that’s close to your work if this is more convenient for you. Or, you may be able to save money by choosing a daycare service in the suburbs, where lower rents for providers could mean lower prices for you.

Is it worth working and paying for childcare?

Whether or not it’s worth working and paying for childcare will depend on your situation. If you are a single parent, you may need to work to make ends meet for you and your children. If you are in a double-income household, this may still be the case, depending on your budget. If you earn a high hourly rate, it may be financially advantageous for you to work and pay for childcare.

You’ll want to think about the rate of pay you get versus what you’ll be charged by a childcare provider, and the time you’ll spend with – and apart from – your kids. As well as costs, paying for childcare will mean you’ll also miss out on some magic moments with your smallest family members, so reducing your working hours – or being a stay-at-home carer – could also be an ideal choice if you can afford it.

What should you consider with childcare?

As well as the type of childcare, other factors to think about include how many children you have who need childcare, and any alternatives to paid services. For some parents, even though childcare is important, it is essential to return to work and maintain their career. If you have a partner, speaking with them and considering your overall family work–life balance is vital.

There could be some tax considerations to weigh up too. For example, are you eligible for the Family Tax Benefit or other government rebates or concessions? You might like to seek advice about childcare from online forums or chat groups. It could be a good idea to speak to a professional financial adviser or tax agent as well.

Where can you get financial advice about childcare?

If you are struggling financially with childcare costs, free financial counselling is available from the National Debt Helpline on 1800 007 007. You can also consider talking to a financial adviser about matters such as integrating childcare fees into your budget. For tax advice, it can be a good idea to seek advice from a registered tax agent.

Who can you contact for complaints about childcare?

If you’ve got any questions or complaints about your early childhood education and care service, the Australian Government recommends you contact the regulatory authority in your state or territory. These bodies are responsible for assessing and rating services, approving providers and services, compliance and encouraging continuous improvement.

Main image source: Mykola Gomeniuk/Shutterstock.com.