Nov 29, 2023


Bringing up baby: tips to manage childcare expenses

bringing up a baby tips
bringing up a baby tips

Emily Luk

CPA, CFA - CEO and Cofounder of Plenty

It's an exciting time - you and your partner are growing your family. As that comes closer, childcare costs are likely top of mind. Many modern couples will face the challenge of steadily rising childcare costs, especially those residing in expensive cities.  

Just how expensive is it to pay for childcare?

A 2022 report by Child Care Aware of America found that the average cost of full-time care infant daycare is over $10,500 per year. But expect to pay over $24,000 in New York City and more than $25,000 in San Francisco (Sources: NY Times, 2023; SF Examiner, 2022.)

That's a significant amount of money to spend each year, which can make it difficult to juggle other expenses and make financial progress. 

Thankfully, Plenty can help you both plan, invest, and track your savings. We've also got some great tips to help you handle child care expenses without breaking the bank.

Prepare for your return to work

Many new parents return to work sometime during their baby’s first year. Wrapping up parental leave can be an emotional and logistically challenging transition. Some parents look forward to returning to work - the early months are often marked by sleep deprivation and a 'loss of self'. For other parents, it's hard to tear yourself away from your child. It's natural to feel like you'll miss some important memories.

However you're feeling about returning to work, you'll want to figure out an affordable childcare solution that works for you and your family. 

Here are some suggestions to consider on childcare options, costs, and more.

Common childcare options

Finding a childcare solution you can trust and sustain will make a huge difference as you adjust to your new normal. For starters, there are three main types of childcare for parents to choose from:

  • Daycare

  • Hiring a nanny

  • Hiring an au pair.

Here’s a summary of each.


Daycare centers are typically run at stand-alone facilities or in a private home where qualified caregivers look after multiple children. The minimum age they take is typically six weeks for infants up to age five for preschool age children.

As we learned above, the average cost of daycare in the US is roughly $10,500 per year. It’s typically the most affordable full-time childcare option in comparison to hiring a nanny or au pair. If you end up having more than one child though, this could change depending on their age gap.

Things to consider include backup care when the facility is closed for holidays or when your child is sick, hours of operation, and commute time. For safety reasons, look for a daycare with a clean record that is fully licensed with your state. To check on a daycare's status, simply run an online search through your state's social services department website.


A nanny is a full-time caregiver who looks after your child in your own home. Benefits include flexible scheduling, no commute time, 1x1 care, and building a strong, trusting relationship. You can also receive additional help with housework, laundry, and meal prep depending on your agreement. Nannies can also care for newborns and older children based on experience. 

With all of these benefits, it’s not a surprise that hiring a nanny is notably more expensive than daycare. The US average is $28,000 a year. Even still, the costs can vary a lot by your location, the nanny’s years of experience, total hours per week, age and number of children in their care, and the expected responsibilities.

Although a nanny can care for your child when they are sick, you will still need to arrange backup care when they are ill themselves or take time off. If you want to hire a nanny, we recommend you run a background check, speak with references, sign a contract, and ensure you’re tax compliant

Au pair

The third main option for childcare is getting a live-in au pair. Effectively a nanny and an exchange student combined, au pairs are young adults who come to the US for 1-2 years to study part-time, improve their English, perform childcare duties up to 45 hours a week, and experience a new culture.

The main benefits are live-in care, flexible scheduling, cultural exchange, language immersion, 1x1 care, a flat fee regardless of how many children you have, and the chance to develop a close familial bond. The average cost per year is around $21,000 family, and will vary by location and whichever au pair agency you choose.

Note that au pairs can only care for newborns less than three months old if a parent or adult is present. Once a baby is over twelve weeks, then au pairs can be home alone while caring for the child. 

There are also several requirements to be aware of, which are mandated by the Department of State including J1 visa approval, passing a background check, and living on-site with the host family. This can affect the timing of an au pair’s arrival in the US. Plus, as the host family, you’ll need to provide full room and board. If you’re interested in this option, an au pair agency can help with the search process and all the logistics.

Take advantage of tax credits to save on childcare costs

A little bit of good news: some of the money you spend on childcare may come back to you in the form of a tax break. The Child and Dependent Care Tax Credit can essentially refund some of your childcare expenses.

The size of the credit varies by number of dependents, how much you paid out each tax year, and your income level. Most tax software will calculate how much credit you’re eligible for when you file your taxes. 

Currently, the maximum amount you can get back is $2,000 per child. The credit starts getting phased out for married couples filing jointly at an income level of $200,000 or more until it’s completely phased out for $440,000 income levels and above.

Pro tip: If you’re married, consider filing your taxes jointly versus separately to increase your eligibility for the credit and other tax savings.

Utilize employer benefits 

Also, we recommend checking if your employer offers any childcare related benefits that can save you money. Here are some examples.

  • Dependent Care Flexible Spending Account: Also known as a DCFSA, these accounts are funded by your pre-tax income. You can use them to pay for a variety of childcare including summer camps. 

  • Flexible Hours or Location: If your company does not offer subsidized backup care, they may offer the flexibility to work from home or adjust your hours if you unexpectedly need to care for your child when sick without dipping into your sick or vacation time. 

  • Family Care Resources: Some employers offer assistance with finding a childcare provider, or give free or discounted memberships to online childcare search platforms.

Get creative bringing up a baby

With the cost of childcare on the rise, many young families are getting creative with their childcare solutions. Here are some additional childcare options to consider.

Nanny shares: One way to reduce the cost of hiring a nanny is to share one with another family. This means you can still get full-time hours while the nanny cares for both families’ children at the same time. Families with one child can save roughly $12,000 a year on average by opting for a nanny share instead of an individual nanny.

Lean on community and family: About 30% of Americans rely on home-based daycares, often managed by friends or family. Of those arrangements, 52% are unpaid – meaning a friend or family member cares for the child for free. Perhaps you have a friend or relative who could pitch in one or more days a week.

You may be surprised at the options available to you just by asking people you love and trust.

How can Plenty help with bringing up a baby? 

Plenty can help you save for childcare expenses and reach your financial goals faster. When you set up a Daycare saving goal in Plenty, we'll ask you a few simple questions to help you determine your budget. If you're curious, our daycare recommendations are based on data from the Center For American Progress.

Simply input the level of care you want to plan for, your child’s age, and a target date for your goal. This might align with your estimated return to work date. 

From there, we'll suggest an amount based on national averages. You'll have the opportunity to adjust based on your own research. And don’t worry if you’re not exactly sure yet how much you’ll end up needing. You can always adjust your goals with Plenty anytime. 

Making decisions about parenting can be hard, and figuring out a plan for your little ones is no exception. Thankfully, a little planning and help from Plenty can make it all feel a little bit easier. 

Start your free trial with Plenty today.

 – Team Plenty 


Emily Luk

CPA, CFA - CEO and Cofounder of Plenty

Emily is the ceo and cofounder of Plenty. Started by a husband and wife team, Plenty is a wealth platform built for modern couples to invest and plan towards their future, together. Previously, she was VP of Strategy and Operations at Even (acquired by Walmart/One) and a founding team member of Stripe's Growth and Finance & Strategy teams. She began her career as a VC, and was one of the youngest nationally to complete her CPA, CA and CFA designations.

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