Daycare Expenses and Financial Independence Retire Early

Daycare is a new adventure for us. It’s the most daunting expense we’ve ever had. It’s more than our mortgage… Quite a bit more.

This isn’t holding us back from financial independence and it doesn’t have to hold you back either. Daycare vs stay at home is one of the ultimate decisions a family will face. Neither choice is inherently bad, it’s all about finding what’s best for YOUR family.

I’m going to share our experience with daycare and explain how it’s actually accelerating our path towards financial independence retire early (FIRE).

Why We Chose Daycare for our Boys

My wife has only been a stay at home mom for about a year of our marriage. We’ve almost been married for 10 years. The large majority of our marriage Kayla has worked part-time.

Luckily, she was the director of a preschool at a local gym club. The boys stayed in the daycare at the gym, while she taught. This was a pretty perfect situation.

Fast forward to 2019, and she expressed to me that she was ready to teach full time. Kayla graduated a couple of years ago and has been waiting to get started on her own career. Read more about why my wife isn’t a stay at home mom.

How We Chose Daycare for our Boys

I always thought that when we were ready to spend the money on daycare, there would be one for us to give our money to. This was not our experience.

The waiting lists are long. Especially if you have multiple kids to put in daycare. Also, there just aren’t that many daycare’s in our local area. Needless to say, we didn’t have much of a choice.

Funny story, I’m actually watching Daddy Daycare with my son as I type this.

Why is Daycare So Expensive

It’s actually unbelievable how expensive daycare is. According to a survey performed by, “Over 70% of families reported paying more than 10% of their income on care, while the U.S. government defines “affordable care” as no more than 7% of family income and More than 40% of families spend more than 15% of household income on care.”

We are currently paying ~$1700 per month on childcare expenses. This blows the government benchmark of 7% out of the water. Because we have two children in childcare Why is it so expensive?

  • High demand, low supply

  • Because they can

  • All-day, including food and snacks

Daycare Cost Ranges with Age

The younger the child is, the more expensive. For example, our 1.5-year-old is about $100 more expensive than our 3-year-old. This is because Liam is still in diapers and Brody is potty trained.

As they both move up, the price will come down a little. Then when they go off to public school, the price goes away. Infant childcare cost is way higher than toddler childcare cost as you can imagine.

We have 2 years until only Liam is in daycare, and 3.5 years until we have no more daycare expense. The expense is only temporary as we are unable to have more kids at this point. The expense is only temporary.

Full-Time or Part-Time Daycare?

When running the numbers for our family, I found it impossible to justify full-time daycare while Kayla worked part-time, and logistically, we couldn’t make part-time daycare work while we both work full-time. In the end, the only solution was either full-time daycare or Kayla keep working part-time with part-time daycare.

Do You Have a Degree or Degrees?

Believe it or not, a college education can help you afford childcare. If it wasn’t for the fact that Kayla was going to be teaching (degree required) and making the salary that she is making (above $50k) it would be very difficult to justify daycare.

Statistically, college-educated individuals earn more over their lifetime than non-college educated individuals. This increased income potential is why many working families choose daycare in the first place. Full-time work that pays well is harder to come by with just a high school education and that’s generally speaking.

A degree is more about what your able to do with it, and how you’re able to sell it to employers rather than some magical pass than secures a positive financial future. I have an MBA and am currently working a software sales position that doesn’t require a degree at all, but the experience and income are well worth it.

We’re Able to Save More with Daycare

When Kayla expressed to me the desire to use her degree and teach full time, I was on board as long as the math worked out. I love my job and am on a fast track to where I see myself in the company. It’s also really flexible. What math did I do to ensure this was a good move for us?

Is Daycare a Smart Financial Move?

  1. Determine your future income

  2. Determine your future expenses including childcare

  3. Determine your current income and expenses

  4. Compare the two figures

  5. Determine if that amount of money is worth daycare

For us, the difference between our current income and expenses was about $1,000 per month. Meaning we were saving $1,000 more than we were spending each month. With the future equation including childcare, we would be saving about $2,500 per month with Kayla teaching. Once the childcare expense falls off in 3.5 years, we will be saving $4,000-$5,000 per month counting for both of our income trajectory and the fact that she will have her masters in teaching by then.

9 reasons why we chose childcare over being a stay at home parent:

Image of nick sitting on the couch with his 3 boys after daycare.
  1. We dedicate our nights and weekends to our kids

  2. Our best memories as kids were family trips and experiences

  3. More easily save for college for 3 kids

  4. Kayla will have the same school schedule as them

  5. We believe interaction with other children is positive

  6. The daycare is Christian based and well-staffed

  7. It will accelerate our path to FIRE

  8. Kayla was ready to start her career

  9. She can quit and return to teaching if it doesn’t workout

Childcare and FIRE

Utilizing childcare while Kayla works is accelerating our speed to FIRE. In the example above, I explain how we are currently saving twice as much each month than we were without childcare expenses. Which currently gives us a savings rate of about 25 percent. What I didn’t mention was that this is based on our income AFTER my Roth 401k allocation and Kayla’s 457(b) allocation.

Here’s some info on the 457(b) plan:

Money saved in a 457 plan is designed for retirement, but unlike 401(k) and 403(b) plans, you can make a withdrawal from the 457 without penalty before you are 59 and a half years old. The money is after-tax dollars and therefore is similar to a Roth IRA, but requires company sponsorship. The exciting part about the 457 retirement plan is the early withdraw without penalty. I should become a teacher too!

If I include the 25 percent savings rate to what we’re already contributing to our retirement account before our paycheck hits our bank account, we have a 35% savings rate. Now, this is on paper as Kayla has only been teaching for a month, and we all know that it’s easier said than done.

We need to stick to our every dollar budget to make this a reality, but once daycare goes away, we should end up with a 40-50+ percent savings rate which will dramatically increase our rate to Financial Independence Retire Early and this is why I believe every family should consider the FIRE movement.

Reducing Daycare Expenses for FIRE

While there may not be a lot of options when it comes to finding affordable childcare, you always save some more money by trying these when it comes to daycare expenses:

Image of two blue hands from finger painting.
  1. Shop around

  2. Ask about a sibling discount

  3. Ask coworkers for references for LICENSED in-home daycare

  4. Utilize the childcare tax credit

  5. Ask HR about flex spending childcare account

  6. Find church-based childcare

  7. Have kids close together, or far apart in age

When purchasing diapers and wipes (and other household staples) we like to use Amazon’s Subscribe and Save feature. This allows us to save a percentage each month and have the items shipped directly to our door. We highly recommend these Honest diapers and wipes.

Daycare Increased Other Expenses

Choosing daycare over stay at home parent is not a straight across comparison. When the boys started daycare we noticed an increase in other expense categories of our budget. For example:

  • Gas consumption increased from longer commute and vehicle size required

  • Increase in diaper usage (they change Liam every 2 hours regardless)

  • Increase in prepackaged food (Liam has a severe soy allergy)

This is one of the main reasons why I stress that daycare is a personal decision that you and your significant other must make together. You need an accurate picture of your finances today and if you were to choose childcare as a solution. For us, the math worked out in favor of our long term plan for our family.

Every dollar you can save in expenses and invest for FIRE, the quicker you will reach your financial independence (FI) number. Remember, if you stop having kids, childcare is only temporary.

Helpful Daycare Links:

FIRE worksheets & budgeting course

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