How to combat the rising cost of childcare

The average cost for full-time nursery for a child under two in England is now nearly £15,000. This is among the most expensive childcare costs in the world, accounting for nearly 30% of the income of the average couple with two children.

When childcare costs eat up a huge chunk of your salary, it's little wonder so many women are quitting jobs or going part-time.

How does this impact our financial resilience?

The decision to take the back seat in our careers has major consequences for our financial resilience.

Women are increasingly being left behind, with pay gaps widening and workplace pension pots nearly half empty compared to men.

This is even worse for single parents.

Our savings and resilience tool shows that single parents are particularly behind in building pension pots, partly due to high childcare costs. Fixing this could not only help close the gender pay and pensions gaps, but could help lower inflation. That’s because an influx of workers back into the workforce could ease worries about a super-tight labour market.

Unfortunately, there’s no quick fix. However, here are six tips to help in the meantime.

This article can help you make the most out of your money, but it isn’t personal advice. If you’re not sure what’s right for your circumstances, ask for financial advice.

6 tips to combat the childcare cost crisis

I'm finally playing catch-up after years working part-time to bridge the gap before my three children, one-by-one, started school. Here’s some things I learned along the way:

1. Reduce hours, but try not to quit altogether. Keeping continuity in your career will pay off over the long term.
2. Working parents can apply via HMRC for top-up money to help with childcare costs, of up to £500 every three months. You have to be eligible, and you can't claim if you or your partner earn more than £100,000. You can check your eligibility here.
3. Universal Credit and working tax credit both have 'childcare elements', where the government gives you extra money towards paying for childcare. If you qualify, you can get up to 70% of what you pay for childcare, up to a maximum of £175 per week for one child, or £300 for two or more children.
4. If you can work from home, ask for flexible hours so that you stop work at 3pm and log back on for an extra few hours after bedtime.
5. After you've built up a rainy-day fund, consider setting up a small direct debit of as little as £25 a month into an investment account. That way your money has the chance of working harder. Just be aware that investments fall as well as rise in value, so you could get back less than you invest.
6. You should be eligible for some free childcare. Currently, parents who work more than 16 hours a week and earn less than £100,000 are entitled to 30 hours free childcare a week for children aged three to four. However, the scheme will be expanded so that all parents will get 30 hours free childcare for all children over 9 months. This will be phased in from April 2024 until September 2025, when parents of children under five will get the 30 hours free childcare per week too. This does differ by country and your circumstances. Check your local government website for advice.
7. For hours which aren’t funded, it’s worth checking out pre-schools rather than private nurseries for two years plus. They’re usually cheaper, but have shorter days. You could always look at setting up a buddy group and take turns to look after each other’s' children from 3pm until 6pm.

Juggling finances and children is hard, but I wouldn’t change it for the world.

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