The High Cost Of Childcare – How To Plan For It

As parents with young children will tell you, daycare is expensive.  It’s especially costly if you have two small children who aren’t school age yet.

As more and more families are dual income these days, young families need to know what options are available to them for childcare so they can manage their finances accordingly.

Related: How To Survive And Thrive As A Single Income Family

The Issue Of Childcare

If both parents are employed full time, kids aged 1-4 need to be taken care of before they enter the public school system.  For many families with two children in this age range, it may be difficult to make ends meet.

To explore this problem, let’s use an example:

Two children are born two years apart and both parents work full time.


The first option is to send your two children to daycare full time.  Here is a table illustrating daycare costs for two children born two years apart.

In this example the mother stays home during the first year of birth then goes back to work.  At the end of year six, both children should be in the public system thanks to full day kindergarten.


Year 1


Year 2

Year 3

Year 4

Year 5

Year 6

Child 1

Child born mother stays home


Infant (6 months)

Toddler (6 months)

No daycare, mother stays home



Preschool: 1 year

Full day kindergarten









Child 2



Child born mother stays home


Infant (6 months)

Toddler (6 months)


Toddler (6 months)

Preschool (6 months)


Preschool: 1 year















The total cost over six years for two children born two years apart in this scenario is $70,600!

*The above numbers are based on a year with 243 working days (253 – 10 vacation days)
**Costs were calculated using the city of Toronto “mid range” fees of $76 for infants, $60 for toddlers and $44 for preschoolers per day.

Home Based Daycare

A home based daycare may be more cost effective than one run out of a larger facility.  Prices vary widely based on several factors such as program and location.  One home based daycare I ran across costs $13,500 per year for a toddler.

Employer Provided Daycare

Some employers provide daycare as part of their benefits package.  A previous employer of mine provided emergency day care services for a few days per year.  Be sure to consult with your employer to find out what child care options might be available.

Live in Nanny

For many families, a live in nanny could be an option.  At approximately $1,600 per month a live in nanny would be paid $19,200 per year plus taxes.

From the table above it would make sense to hire a live in nanny for year four.  However in subsequent years as daycare costs decrease, the cost for the nanny would not offset the daycare costs.   

Keep in mind however that a live in nanny may provide more services than a normal daycare program.  They may perform housework such as cleaning, preparing meals, picking up or dropping kids off at school, etc.  The additional funds spent may well be worth it.

Live Out Nanny

At around $2,000 per month ($24,000 per year), a live out nanny is a more expensive option since they will need their own accommodation.   


Grandparents usually love to take care of the little ones and are a source of relief for couples who need some alone time.  Grandparents may consider taking care of the kids for an extended period of time, say a couple of weeks, but counting on them to replace structured programs is probably not an option. 

One Parent Stays Home

One option that many families opt for is to have one parent stay home.  Classically this has been the mother but these days the father may want stay at home!

Related: Can You Afford Not To Stay Home With Your Kids?

In the example above, year 4 is the most expensive year with daycare costs over $27,000. In the event one spouse makes less than $31,000 per year before tax ($27,000 after tax) it may make sense financially for that person to stay home with the kids.

Not only are there financial savings to be had but the kids are getting to spend more quality time with their mother or father.  Keep in mind that if you have three children, the case for a stay at home parent gets stronger.

Regardless of what the numbers say, staying home to raise children is a very personal and emotion decision.

Related: A Mother’s Struggle Between Work And Kids

***Childcare expenses are tax deductible up to a certain amount. More details are available here.

What’s Best For Your Family?

While there isn’t a specific solution to the double daycare dilemma and the general high cost of childcare, there are many ways to tackle the problem.

It will come down to family circumstances, incomes and the amount of time you want to spend out of the workforce.

One way to lower the impact of high childcare costs is to plan for it.  You could set aside a percentage of your income each month to begin building a cushion for this a couple years in advance.

If you are already dealing with high costs, sit down and map out what those costs will look like in the future and adjust spending on discretionary purchases accordingly.

Remember that the high costs of having two children in daycare will diminish eventually and your finances can then take a breather.  Don’t relax too much though because you’ll then need to start saving for their University or College education!

Related: Where To Find The Best Savings Accounts For Children

Andrew Martin is a personal finance and investing blogger from Toronto, Ontario with a background in technology and a passion for travel.  His blog, She Thinks I’m Cheap aims to help Canadians make more money by sharing facts, stories and advice.

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  1. James on October 5, 2012 at 2:06 pm

    My wife and I have often debated whether or not it would be worth it to send our three children (an infant, preschooler, and 2nd grader) to daycare so she could return to work. At this moment we have opted for the mom-at-home option. We think that the few dollars an hour that she would make after daycare costs are simply not worth it to have someone else raise our children full time. My wife works at the daycare center at the local gym twice a week while my two eldest are in school. She is able to take the baby with her, get out of the house, socialize, and get our family a free membership. So right now this arrangement works for us. Every year we revisit this debate as the children get older, and every year the decision is still a though one.

  2. Kevin @ Growing Family Benefits on October 5, 2012 at 3:42 pm

    Your chart highlights a huge challenge.

    Canadians have the advantage of paid maternity leave (55%), and a guarantee of a job after one year.

    Couples in the U.S. don’t fare nearly as well. The childcare costs are similar, but most often leave is unpaid, and job guarantees run out after 12 weeks – if they qualify.

  3. Joe on October 5, 2012 at 4:47 pm

    Great post. In Ontario, the laws about ratios of kids to employees are so strict (e.g. I think it’s like 1:1 for babies) that daycare is just ridiculously unaffordable (as it ought to happen when gov’t interferes too much in a free market but doesn’t offer any reasonable subsidies to WORKING families).

    But the exception — again based on my imperfect memory of my imperfect research — is home-based daycares if the owner is taking care of their own kid(s). Hmm… Uncle Joe’s Daycare Emporium!?

  4. Andrew @ She Thinks I'm Cheap on October 6, 2012 at 2:18 pm

    Thanks for the feedback, I never knew our southern neighbors were at a such a disadvantage when it came to support for families. Paying higher taxes does have its advantages.

  5. Chris on October 11, 2012 at 1:43 am

    Wondering what “plus taxes” need to be paid for a ‘live-in’ nanny:

    “Live in Nanny
    For many families, a live in nanny could be an option. At approximately $1,600 per month a live in nanny would be paid $19,200 per year plus taxes.?

    Not sure what that would mean

    • Amanda on October 16, 2012 at 8:45 am

      You need to pay the employer portions of CPP and EI, plus WSIB premiums (in Ontario at least).

      Also, the quoted rate assumes minimum wage, 8 hour days, and the maximum room/board deduction. We needed 9 hours and paid $11/hr rather than $10.25, plus didn’t provide breakfast and dinner for our nanny (her choice; she was in our basement apartment). So it was about $25,000/yr with CPP/EI/WSIB included.

      Still worth it, since daycare was about the same (two kids 10 months and 3.5 in half day JK – not everyone can get EI!) and not having to worry about dropoff/pickup was awesome. But live-out might have been better if we offset with rental income from the basement. Most live-out nannies were quoting us $15-20/hr though, so 3k-4k/month!

  6. Geoff on October 12, 2012 at 10:29 am

    Your chart is a little wrong for most people with kids in full day kindergarten there’s still a monthly cost for daycare, unless their work allows them to pick the child up at 3pm. You have to pay for afterschool programs (and if you consider the school opens at around say 8:15 and you have to be at work at 9am and your commute is 90 minutes, you’re paying for before school as well). Afterschool runs you another $350 or so… right up until around you feel comfortable about them coming home on their own, if they even can.

  7. Geoff on October 12, 2012 at 10:30 am

    Oh and yes you get 55% of your income, but only up to a limit. In my wife’s case, her mat leave pay was a pittance compared to her regular salary (and she wasn’t making six figures, either).

  8. Bet Crooks on October 16, 2012 at 11:23 am

    Another part of the decision may be the child or children’s health. Most daycares are not able to take children with an infectious illness, even just a really bad cold. Of course, children prefer to stay home with a parent when they’re feeling sick, too. If one parent stays at home, they can probably look after the ill child. A nanny may also be available to look after a sick child, if that was included as part of the terms of employment from the beginning. If daycare is the plan and the child is prone to illnesses, parents will have to budget for some other kind of in-home care for the child. Most of us are not allowed to miss work just because our child is sick, and expecting elderly relatives to care for sick children is not realistic as they can get very sick themselves. Just another factor in the complex puzzle.

  9. Cozy on June 17, 2017 at 3:49 am

    Can both parents claim child care expenses?

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