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Financial planning tips

December 20, 2017

Choosing child care

It can take a lot of research to choose the best way to look after your child while you work. Here’s some help to get you started.

For many parents, heading back to work after spending a few months (or years) with young kids doesn’t just mean getting back into the swing of a workday routine — it also means facing the daunting task of comparing child care options.

The difference between regulated and unregulated child care

In Canada, child care generally falls into 2 categories:

  • Regulated child care centres can be non-profit daycares, for-profit, privately run child care centres or home-based daycares. They are provincially licenced and are expected to meet a list of criteria for safety procedures, staff qualifications, group size, insurance protection and even nutritional requirements. In Ontario, for example, regulated child care providers must meet standards listed in the Child Care and Early Years Act 2014.

    Regulated child care spaces are scarce and expensive in many regions. Across the country, waiting lists for regulated spaces are very common and child care costs are north of $900 per month for infants and toddlers in many cities. For example, the median monthly fees for infants in Mississauga, Ont. (the 2nd-most expensive city) are $1,452, while in Calgary, monthly fees for infants are slightly lower, at $1,250, according to a 2017 report from the Canadian Centre for Policy Alternatives.

  • Unregulated child care is the most common option for Canadian parents as a result of the scarcity of regulated spaces. It takes place either in a home daycare environment or in the child’s home, as provided by a babysitter or nanny.

If a home daycare provider looks after fewer than the maximum number of children set out in provincial law (the younger the child, the lower the maximum), she or he is not required to have a licence or meet provider or facility criteria.

Erin Chrusch, Calgary-based blogger and mother of 2, used to take her children to an unlicensed home daycare. Because of scheduling issues and her kids’ changing needs, she switched to before-and-after-school care for her son at a classmate’s home, and a newly opened licensed daycare facility for her daughter.

Each option has benefits and drawbacks with respect to cost and flexibility, she says.

“Our daughter's daycare centre is more expensive than our old home daycare, but the fact that we aren't running back and forth to get her to preschool, and we have a schedule that both my husband and I can manage without too much trouble is worth the extra cost,” she adds.

The in-home option: Nannies and babysitters

Nannies and babysitters care for your children in your home, either on a live-in or live-out basis. They don’t require a licence.

“Having a nanny means we don’t have to get our kids up and ready in the mornings and race to daycare and do the opposite in the evenings,” says another Calgary mother, who prefers not to be identified. She hired a live-in nanny before her recent return to work from her 2nd maternity leave.

At the same time, there are downsides to having a nanny, compared to daycare, she says. Children may not get the same social experiences they would in a group setting, and a nanny can be pricey. As the nanny’s employer, you are responsible for meeting employment standards obligations for minimum wage, vacation/break time, taxes, EI, CPP and workers’ compensation. Also, if you hire a nanny from abroad, there are a number of additional costs to consider.

But the more kids you have, the more financial sense a nanny may make on a cost-per-kid basis. Nannies may also give you more flexibility when it comes to schedules; for example, not all daycare centres offer early or late pick-up and drop-off.

Note: While in the past international workers could apply to work as nannies via the Live-in Caregiver Program, that program is now closed to new applicants. Consult the federal government’s website for more details on hiring an international nanny.

What does child care cost?

Depending on the type of care you choose, what you’ll pay for child care varies greatly. Generally, regulated childcare is more expensive, but the cost of child care also depends on where you live. Some provinces, such as PEI, Quebec and Manitoba, fund operating expenses for child care. This makes regulated child care costs in these provinces often lower than elsewhere in the country. For example, the cost for regulated child care can range from the government-subsidized $168 per month for infant care in Montreal to an average of more than $1,758 per month for an infant in daycare in Toronto, according to the Canadian Center for Policy Alternatives report.

Child care, tax breaks and benefits

No matter which child care option you choose, the spouse with the lower income can claim a child care expenses deduction on his or her income tax, for payments made to caregivers, nursery schools and daycare centres. “That then becomes a deduction directly off your income,” explains Doug Morgan, tax specialist with H&R Block in New Minas, NS.

For children aged 6 and under, the limit for child care expense claims is $8,000 per child per year; you may claim a deduction for an older child with a disability. (Canada Revenue Agency classifies children by their birth year rather than calendar age; check the current information on the CRA's website.)

But receipts are the key to claiming these deductions, Morgan adds. A babysitter, for example, should provide you with a receipt showing his or her name, social insurance number and the amount you have paid. Also, as the education component of a nursery school isn’t considered child care for tax purposes, Morgan says a nursery school should clearly indicate the breakdown on the receipt, to avoid confusion.

If you are a parent of a child under 6, you may also be entitled to the universal child care benefit. Note that this benefit is payable whether you pay for your child’s care or you’re a stay-at-home parent. You may also be eligible for the Canada child tax benefit.

Another tax benefit to take advantage of when you have young children is the registered education savings plan (RESP), which combines tax-advantaged savings with free money in the form of government grants, to help you save for your children's post-secondary education.

Other child care possibilities

The family option

From a comfort (and cost-savings) perspective, having a grandparent or family member watch your child during the workday may be ideal.

“I love the peace of mind of knowing that my daughter is cared for by people who love her and will care for her the same way that I would,” says Lisa McLindon, a Whitby, Ont mom who has both sets of grandparents looking after her child during the work week.  “The convenience and money are also great, but that's definitely number 1.”

But this option also doesn’t come without considerations, she adds.

“One drawback is that I am not paying for a service and therefore I don't feel that I can give as much criticism as I would if she were in a centre. So far we haven't had any issues but I sometimes worry that it would be hard to approach a potential conflict,” she says. Another drawback is that without receipts, you can’t claim the child care expenses tax deduction.

The stay-at-home option

Especially if it seems like all of your take-home pay is going to the daycare, it may be tempting to forego child care altogether and look after the kids yourself. But, says the U.S. website BabyCenter, there are costs to doing so. Over the long term, staying home can cost a parent significantly in terms of missed CPP and company pension contributions (yours and your employer’s) and lost supplemental medical coverage for health care not covered by your provincial plan, such as prescription drugs and dental care. If you plan to return to work at some point, you should also consider the costs associated with missing promotion and development opportunities and seeing your technical skills become outdated.

To help with your child care search, checklists such as the City of Toronto’s Licensed Child Care — Visit Checklist provide questions to ask home-based daycare providers and centres, including:

  • How many children are in the home and what are their ages?
  • Are parents welcome to visit at any time?
  • Do all team members have first aid training?
  • What is the policy if I am late to pick up my child?

Similarly, Canadian Nanny sets out a list of sample interview questions to help you figure out if a potential nanny has the skills and experience you’re looking for.

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