Daycare, home-based (also known as family care centers)
Family care centers offer a home-like alternative to daycares, with smaller staff-to-child ratios and often more personalized care. They are favored by families seeking a more intimate setting. They might offer more flexible scheduling and are typically less expensive than facility-based daycares, at up to 25% lower cost.1 They may lack the same structure and educational opportunities as facility-based daycares, however, and are not subject to the same health and safety regulations.
Nannies
Nannies are professional caregivers who provide in-home childcare services. Their responsibilities may include feeding, changing, dressing, bathing, and playing with children. In some cases, they may also be expected to do light housekeeping tasks like meal preparation, laundry, and cleaning. It is common for nannies in high-demand markets to refuse to perform these additional tasks, however. Nannies are preferred by families with hectic schedules due to their flexibility. They can work early, late, or even overnight shifts, and provide care in the comfort of your home, avoiding the hassle of drop-off and pick-up times. Nannies also can provide personalized care to meet each child’s specific needs, and they can care for children who are sick or febrile.
When hiring a nanny, it is important to have a written contract outlining their expected hours, wages, benefits, and duties to prevent misunderstandings in the future. Finding a trustworthy and reliable nanny can be a challenge, and families have several options for finding one. They can post jobs on free websites and browse nanny CVs or use a fee-based nanny agency. The cost of using an agency can range from a few hundred to several thousand dollars, so it is important to ask friends and colleagues for recommendations before paying for an agency’s services.
The cost of hiring a nanny is one of its main drawbacks. Nannies typically earn $15 to $30 per hour, and if they work in the family’s home, they are typically considered “household employees” by the IRS. Household employees are entitled to overtime pay for work beyond 40 hours per week, and the employer (you!) is responsible for payroll taxes, withholding, and providing an annual W-2 tax statement.2 There are affordable online nanny payroll services that handle payroll and tax-filing to simplify the process, however. The average annual cost of a full-time nanny is around $40,000 and can be as high as $75,000 in some markets.1 A nanny-share with other families can lower costs, but it may also result in less control over the caregiver and schedule.
It is important to consult a tax professional or the IRS for guidance on nanny wages, taxes, and payroll, as a nanny might rarely be considered an “independent contractor” if they meet certain criteria.
Au pair
An au pair is a live-in childcare provider who travels to a host family’s home from a foreign country on a special J-1 visa. The goal is to provide care for children and participate in cultural exchange activities. Au pairs bring many benefits, such as cost savings compared to traditional childcare options and greater flexibility and customization. They can work up to 10 hours per day and 45 hours a week, performing tasks such as light housekeeping, meal preparation, and transportation for the children. Host families must provide a safe and comfortable living environment, including a private room, meals, and some travel and education expenses.1
The process of hiring an au pair involves working with a designated agency that matches families with applicants and sponsors the J-1 visa. The entire process can take several months, and average program fees cost around $10,000 per placement. Au pairs are hired on a 12-month J-1 visa, which can be extended for up to an additional 12 months, allowing families up to 2 years with the same au pair before needing to find a new placement.
Au pairs earn a minimum weekly stipend of $195.75, set forth by the U.S. State Department.3 Currently, au pairs are not subject to local and state wage requirements, but legal proceedings in various states have recently questioned whether au pairs should be protected under local regulations. Massachusetts has been the most progressive, explicitly protecting au pairs as domestic workers under state labor laws, raising their weekly stipend to roughly $600 to comply with state minimum wage requirements.4 The federal government is expected to provide clarity on this issue, but for the time being, au pairs remain an affordable alternative to a nanny in most states.
Conclusion
Choosing childcare is a complicated process with multiple factors to consider. Figure 1 breaks down the estimated annual cost of each of the options outlined above for a single child in low, average, and high cost-of-living areas. But your decision likely hinges on much more than just cost, and may include family dynamics, scheduling needs, and personal preferences. Gather as much advice and information as possible, but remember to trust your instincts and make the decision that works best for your family. At the end of the day, what matters most is the happiness and well-being of your child.
Dr. Hathorn and Dr. Creighton are married, and both work full-time with a 1-year-old child. Dr. Hathorn is a bariatric and advanced therapeutic endoscopist at the University of North Carolina at Chapel Hill. Dr. Creighton is an anesthesiologist at UNC Chapel Hill. Neither reported any conflicts of interest.
References
1. Care.com. This is how much childcare costs in 2022. 2022 Jun 15.
2. Internal Revenue Service. Publication 926 - Household Employer’s Tax Guide 2023.
3. U.S. Department of State. Au Pair.
4. Commonwealth of Massachusetts. Domestic workers.
Disclaimer
The financial and tax information presented in this article are believed to be true and accurate at the time of writing. However, it’s important to note that tax laws and regulations are subject to change. The authors are not certified financial advisers or tax specialists. It is recommended to seek verification from a local tax expert or the Internal Revenue Service to discuss your specific situation.
