Day Care Bills

Full transparency: Before I had kids, I looked at day care graduation photos with a certain level of judgment and cynicism.

It seemed silly to me, like participation trophies. I liked the idea of celebrating just one major graduation, which represented the culmination of all a child’s academic achievements over the years. But then I had kids, and a realization hit … the graduation is not for the child. It’s for the parents! With two kids, day care is our largest monthly expenditure. Coming in well over our mortgage, we often feel the strain of juggling day care bills, our daily expenses, and savings for family vacations and retirement. So, I assure you that when it’s time for my children to graduate day care, I will be celebrating with the rest of those parents I used to silently judge!

In the meantime, I’m taking advantage of any and all opportunities to reduce the financial sting and plan for the much-anticipated moment when the monthly expense of day care bills drops from our household profit and loss statement.

What I’m doing now

If your employer offers a dependent care FSA, take advantage of it! This type of account allows you to set aside pre-tax money for eligible dependent day care expenses. Essentially, money is withheld from your paycheck and goes into an account (before tax) to be used for day care, summer camp, nursery school, preschool, etc. You simply pay out of pocket, then submit claims to reimburse yourself. This is free money and a no-brainer. Note – these accounts do not roll over from year to year. Use it or lose it.

What I plan to do

It’s never too early to start saving to a 529 plan! Just like any investment account, compounding returns mean that the earlier you start, the more your investment will work for you, even if it’s only $25 per month at first. I get it: It’s hard. But it is very important to have accounts open and a funding strategy in mind by the time your kids are wrapping up day care. My personal goal is to divert the day care expenses that I am currently paying directly to our daughters’ 529 plans. I’m already accustomed to spending that money, so it should be painless to switch it over to savings. Otherwise, I risk lifestyle creep, and the money is consumed in any number of other ways. And since I intend to send my kids to public school, I will still have 13 years to grow and build their 529 plans. If you decide to take the private route, the 529 plan may still be a good option since $10,000 per year in private school tuition can be paid out of it.

What you should always be doing

This accumulation phase of life can be hard. How do you save for education and retirement, get away once in a while, and not take a vow of poverty? It is doable, but not without a meaningful understanding of your monthly budget and some real discipline. If you are struggling to save and pay bills, my recommendation is to start budgeting! It is empowering to be fully informed and able to hold yourself accountable for your day-to-day financial choices. Talk to your Parsec advisor about setting you up with a budgeting tool to help you get on track!

Of course, strategies vary depending on your own situation and goals. No doubt this can be a challenging phase of life, but a financial advisor can help you stay on track.

Facebook
Twitter
LinkedIn
Email
Print

Also In Financial Planning Basics

Home Mortgage

You must manage your borrowings to your benefit alongside smart saving and investment decisions in order to achieve the most out of your financial situation.

Read More »

Send Us A Quick Message

Jot down what’s on your mind and we will get back to you as soon as possible. We look forward to hearing from you!

Our Contact Info

Please read the following disclaimer:

All information included in this page and all pages throughout Young Money, Smart Money is provided for informational and educational purposes only and should not be taken as investment advice or a recommendation to invest accordingly. Investing involves risk, including a potential for a loss of principal. Educate yourself about all investments and funds you purchase, including their risks, objectives, and fees and expenses before investing. For additional assistance, please contact us or another financial professional for a more detailed review of your specific situation.

Sign Up For Our Newsletter

Fill out the form below to begin receiving emails from Young Money, Smart Money.