The average spending on daycare for infants and toddlers in New York City is $1800 per month (Source: NYU). In King’s County, it can cost upward of $350/week to enroll your baby (less than 3 years old) in full time child care.
In the past year, my family spent an incredible sum on childcare — $900 per week (because yes, we have twins). This brought us to a grand total of almost $47,000 last year.
If looking at those numbers leaves you feeling a little queasy, you are not the only one! Daycare is incredibly expensive, and most families are unsure of how to best handle the sudden jump in expenses they experience when their newest family member heads off to daycare after their maternity or family leave comes to an end.
Luckily, we New Yorkers have a light at the end of the tunnel that many Americans do not. The state of New York now offers free, full-time pre-k for all residents age four and up, as well as free, full-time preschool for three year olds in some areas.
Children born in 2015 will enroll to start pre-k in the fall of 2019, and enrollment starts this winter. If your child was born in 2014 and enrolled this September, congratulations! You made it!
Free full-time pre-k comes as a huge relief for many parents who were shelling out thousands of dollars each month for daycare. In 2017, when the program was launched, the pre-k 3 initiative alone enrolled 5,700 three year olds. Close to 70,000 total four year olds are enrolled in the city-wide program. That’s a huge number of people who suddenly have thousands of extra dollars in their family budget each month.
As incredible as these programs are, it’s still important for you to do your due diligence before your kids head off to preschool or pre-k. Freeing up thousands of dollars for your family each month is an incredible feeling, but many still fail to put those funds to good use. So, what can you do? Start by figuring out exactly what to expect.
It Won’t All Go Away
Don’t just assume that sending your kids to preschool or pre-k will automatically result in the exact amount of money you were spending on daycare suddenly being available. More often than not, preschool and pre-k come with their own expenses. For example, you may need to consider school supplies, transportation costs, or costs for after-school programs if the full-day (6 hours and 20 minutes) schedule doesn’t work for your family’s needs. For example, our program ends at 2:30, but there are after school options until 6:00 PM. You need to pay for that.
Don’t Start Spending Like Crazy
Once you’ve calculated exactly how much “extra” you’ll be freeing up by stopping daycare attendance, it’s easy to start spending those funds before they even hit your bank account. In fact, you may already be online window shopping for the new furniture you’ve been putting off purchasing, or considering the best location for a family getaway. You have to remember that you got by without these funds before, so spending every cent of your newfound cash flow isn’t necessarily going to add a great deal of value to your life or the lives of your family.
One idea that often works is to write down any big purchases you’re considering while you wait for the daycare payments to stop. Sit on them for a while, and if you still feel they’re necessary or would add value to your day-to-day, work them into your new budget. Don’t use this opportunity as an excuse for overspending just because you’re coming from a place of scarcity to a place of abundance. You could end up making large purchases you regret.
Do Celebrate the Wiggle Room
This isn’t to say that you shouldn’t spend any of the money you’re no longer putting toward child care. Depriving yourself is an extreme, and overspending is an extreme – you want to find a happy middle ground. Maybe consider a small expense to celebrate having a bit more wiggle room in your budget, or put the money from your first few no-daycare months toward a big financial or purchase goal you’ve had for a long time.
Don’t Assume It Will Go Toward “Good” Goals
We all like to think the best of ourselves when it comes to our money. We create a budget, set savings goals, and are determined to start putting more money toward retirement. Sound familiar?
When push comes to shove, we often take the easier option. Unfortunately, that easier option is often to spend rather than save wisely. Assuming the money that’s newly available will go toward all of your “good” goals is a mistake. Just because you know you should be saving doesn’t mean it’s actually going to happen. When you make assumptions like this, and you make a mistake, you’re more likely to beat yourself up and less likely to recommit (and stay committed) to your “good” financial goals.
Do Make a Plan and Automate Implementation
Instead of assuming that you’ll spend your newly available funds wisely, get proactive. Make a plan. With $1,000-2,000 extra each month (or more if you have twins like me!), you could make big, positive strides toward your goals. So, which ones should you be considering? Let’s go down the list, in order of importance:
- Fund your emergency savings. Having 3-6 months of monthly expenses in liquid, accessible savings can be a game changer in case you’re ever confronted with an unexpected expense.
- Pay down your debt. Start by paying down any credit card debt you have, then move to paying off student loans and your mortgage.
- Contribute to your retirement savings. Are you maxing out your workplace retirement savings? If not, now’s the time to increase your contributions!
- Contribute to additional savings accounts, like an HSA or FSA. These accounts are phenomenal savings tools for families with kids who may have unexpected medical expenses, and an HSA can be used to save for medical expenses during retirement.
- Save toward “extra” goals like purchasing a home, or taking a big vacation. Whatever your larger-than-life goals are, you could consider putting the extra funds you have coming in toward saving for them.
- Fund a 529 plan for your kids. The funds you were spending on daycare can now help build your education savings. A 529 plan helps you to save for their college education starting now, and the funds a grow tax-free.
Are you feeling unsure of what to do with the extra funds in your budget now that preschool or pre-k is starting? Let’s talk.