Summertime Puts Parents at Risk of Child Care Debt, Data Shows

Will you be spending a small fortune on child care in July and August? You're in good company.

Maurie Backman
Maurie Backman
Jun 21, 2019 at 8:48AM
Investment Planning

Working parents with young kids know all too well that the cost of child care can be a major burden. But for families of school-aged children, summertime in particular can be brutal. That's because parents who otherwise fall back on relatively affordable after-school care programs or babysitters often have no choice but to spring for full-time summer camp in order to maintain their jobs in July and August.

The cost of summer camp can be astronomical, though. Almost 20% of parents who are paying for child care this summer plan to spend more than $2,000 per child on it, according to a new Bankrate survey. For a family with three school-aged children, that means a total tab upward of $6,000 -- for a mere two months of care.

Children playing tug of war

Image source: Getty Images.

It's no wonder, then, that so many parents are using credit cards to cover that expense. An estimated 33%, in fact, will accrue debt in the course of paying for summertime child care.

If you're facing a mountain of child care bills this summer that you'll likely have no choice but to finance on a credit card, a little planning on your part could prevent a repeat scenario next summer.

Plan wisely

As a working parent, you have no choice but to absorb the cost of full-time care when school's not in session. But if you save for that expense in advance, you won't have to rack up loads of debt to retain your paycheck.

If you don't yet have a budget, create one immediately and include a line item for summertime care along with your other expenses, like housing, transportation, food, utilities, and healthcare. Then, start putting money into savings every month so that by the time next summer arrives, you'll have the cash to pay for child care.

At the same time, use existing tax breaks to make child care more affordable. If your employer offers a dependent care flexible spending account, you can contribute up to $5,000 in pre-tax dollars to pay for child care so that you can work. In most cases, summer camp is considered an eligible child care expense under these plans, and if you're looking at spending $2,000 per child for three kids, you'll have no problem maxing out -- especially if you pay for additional after-school care during the year.

Of course, you don't have to contribute the full $5,000 to your dependent care account. See what your yearly child care costs look like, and allocate enough money to cover them as best as you can.

At the same time, be sure to claim the Child and Dependent Care Credit when you file your taxes. Depending on your income, you can claim between 20% and 35% of your child care expenses, up to a maximum of $3,000 for one child, or a maximum of $6,000 for two or more children. To be clear, if you have two kids and spend $7,000 on child care for them during the year, you can only deduct between 20% and 35% of $6,000. It's not the most generous tax break out there, but it's better than no tax break at all.

Summertime is often regarded as a period of leisure, but for working parents, it can be extremely stressful. Saving in advance for your child care costs, and being tax-savvy about them, can ease that burden and make a whopping expense just a bit more manageable.