Nanny or nursery? How to make the right decision for your wallet (and children)
Parents starting a new search for childcare are bombarded with terrifying figures about how much it will cost.
One in 10 parents pay the same or more than their daily take home pay on childcare costs, according to a recent study. Campaigners have been warning that parents – predominantly mothers – are being forced into debt just to maintain their careers.
Measures announced in Chancellor Jeremy Hunt’s Spring Budget to extend the 30 hours free childcare to those aged nine months and over will soften the blow for eligible parents.
However, they will have to wait until April 2024 at the earliest for the new benefit to be phased in. The free hours only apply for 38 weeks of the year, during term time, so it’s not a year-round benefit. And parents who earn over £100,000 are not eligible.
Until parents with children aged under three become eligible during the phasing-in process, they will still be footing a large bill.
Full-time nursery fees for a child under two in the UK currently cost an average of £13,000 a year, more than half the take-home pay of a typical £33,000 salary, according to Penfold, a pension provider.
While the cost of childcare in the UK is soaring, it’s not an area where parents can cut corners easily. Aside from the fact that mothers and fathers want the very best for their little ones, there are no comparison websites for childcare and no opportunity to haggle over the cost of a nanny or a nursery.
Annabelle Williams, personal finance specialist at Nutmeg, said: “There’s no one-size-fits-all cheapest option with childcare.
“Crunch the numbers for the different options – nurseries, local childminders or having a nanny at home – and think about which would be the most affordable and most suitable, factoring in your working hours, where the childcare is located and what might suit your child’s needs.”
There is no easy choice while childcare costs remain so high. Here are the options and what each could set you back.
Hiring a nanny
Having a nanny is arguably the holy grail of childcare – they will look after your child at your home, prepare meals (and clear up), and take them on outings and to any classes you wish, with plenty of attention lavished upon them.
This does not come cheap. Wages vary but the latest NannyTax Salary Index suggests a nanny will cost up to £40,000 a year. In London wages reach £39,800, falling to £35,400 when including the Home Counties. The rest of the UK pays an average of £32,500 a year.
You will become an employer whether the nanny is live-in or live-out. As such you will be responsible for registering as an employer with HMRC as well as offering statutory sick pay, maternity pay and a pension.
You will also need to prepare a contract of employment which should spell out all the terms and conditions of the employment including hours, duties, benefits (such as holidays), and wages.
Ms Williams added: “If you have more than one child the cost won’t be so great when compared to what you might pay for two children at nursery. Having a nanny is also attractive because your children will be cared for in their own home, you won’t have to make the journey for drop-offs and pick-ups, and you can be around to have oversight of how they’re looked after.”
To cut the cost, some families nanny share by dividing the nanny’s time between a few families, or having them take care of both children at once. How much you can save depends on how many shared hours your nanny works. But it’s a good way of achieving a discount.
Sites such as Childcare.co.uk, Tinies and Koru Kids are worth searching to match you up with a nanny. They can also help with finding other people in your area with the same idea to nanny share.
However, it’s apparent that there are fewer nannies operating in the UK now, with Brexit making it much harder for nannies from the EU to work in the UK. If you work from home, you’ll need to ensure you have the space to work away from the children for this to work.
Sending children to nursery
You might be keen for your child to attend nursery to get them interacting with other kids, as well as being in different surroundings and having access to a bunch of different toys. If one or both parents work from home and would prefer not to have children around during the day, then nursery is the obvious choice.
Full-time fees for a child under two at nursery average £269 a week – or just under £14,000 a year.
Though providers are expected to increase fees by an average of 8 per cent this year, according to the Early Years Alliance, taking the average fee to more than £15,000.
A good idea is to start looking for a nursery as early as you can. It is likely you’ll find that the more affordable nurseries get snapped up fast, so you should move quickly to have your child on a waiting list – as long as it’s offering quality care, of course.
Regulator Ofsted rates nurseries and according to the latest report 96 per cent of nurseries and pre-schools are rated good or outstanding. You can get opinions from parents by finding local Facebook groups or asking local friends for recommendations.
A childminder can be cheaper depending on where you live and the hours of childcare you need.
Hiring an Au Pair
Nurseries and nannies are simply too expensive for many families. Hiring an au pair is one of the least expensive childcare alternatives – as long as you have a decent spare room and do not mind sharing your home. Au pairs are young people from outside the UK who live with you and care for your children. In return they get free accommodation, meals and pocket money – rather than a salary – of at least £90 a week.
There will be other expenses to factor in – for example, your energy bills might rise as your au pair will be staying in your home. You will also need to pay their share on any family outings or meals out.
This only really suits if you have a spare room – and an office to hide out in if you work from home. Challenges from Brexit might also apply to au pairs too, however.
If you can work flexibly then you could use a mixture of childcare solutions. Perhaps some time in nursery and some with a childminder.
Childminders have been in short supply in recent years, with the number down almost 10 per cent in England last year. A government incentive payment of £600 might entice more to join the sector. Plus they will be able to look after one extra child as the Chancellor announced the adult:child ratio will be changing to allow a childminder to look after five children instead of four.
If you are lucky enough to live near retired grandparents, perhaps they can lend a hand for an afternoon here and there.
If you have friends nearby – perhaps neighbours or from your NCT group before the children made their appearance – you could group together and working out a system where you can look after each other’s children.
You’ll need to find one with a child around the same age, a similar approach to parenting, and the same need for affordable childcare. If you take them for one day each, you get two days of childcare for the price of one day off work.
If childcare costs means it’s not worth returning to work, it might make more sense for one parent to stay at home.
When crunching those numbers, don’t forget to factor in pension payments and other benefits that will be lost.
You will also need to pay for clubs, classes, lessons and days out to amuse the little ones, many of which will cost money.
When children start school, there’s still a gap to plug between when school finishes and the end of the working day. Schools often offer after hours clubs. According to Coram Family and Childcare, the average weekly price for families using an after-school club for five days a week is £66.52 a week, or £288.25 a month.
You might find a childminder is better value, however. While the average cost of a childminder is more at £71.39 a week, (£309.35 a month), care is usually until 6pm – whereas after-school clubs might not run as late.