If you’ve got kids in the UK, then you are no doubt aware of what a monster the costs of childcare can be. For those who don’t have kids, it’s about 27pc of a family’s net income, as reported by the Daily.
Compare that to the rest of Europe, where people are on average paying 10pc or less of their disposable income for childcare, and you’ve got to wonder what’s going on in the UK. You wouldn’t be alone in wondering that either, with Elizabeth Truss, Tory MP, recently calling for the UK childcare system to be overhauled.
For many, this initiative would seem to mean a positive change to their standards of living, as there would be more income to go around the family. However, that’s not actually the case.
What’s being discussed is a bit different and has drawn criticism, as it is more of a short-term solution than it is any real sort of answer to the problem. That is because it doesn’t really address the fact that many people pay more to park their car than they do to take care of their children. Because of this both parents and MPs fail to consider that if the space to park a car has a particular value, then so does the space to keep a child – plus the costs of caring for that child, which a car does not need when it’s parked.
In fact, the annual average low cost of a child minder in the UK runs about $5,000 for a two year old. That’s nothing, as a good car park is almost the same cost. Of course the actual costs can vary drastically depending on where you’re located, with some parts of London having rates of more than $20,000 per year for a part time child minder.
While this may seem a bit silly, especially for part time childcare, the fact is that it’s very expensive to provide a decent level of care at a reasonable cost, or at least that’s what the companies out there providing childcare have to say, as reported in this article by the BBC. The thing is, they also report that there are other people who aren’t raising their rates, and who do not charge as much as the bigger institutions do. So why aren’t more people minding children if it’s profitable?
Part of the problem has to do with the legislation and approval processes that go into setting things up. It can take someone upwards of six months just to get approved. Then add in the rest of the things that go with it, such as taxes, insurance, and business licensing fees, and the actual costs go up even more. All of this for a person who will take care of your child, play with him or her, and make sure meals and other necessities are taken care of while you’re at work.
It’s exactly those considerations that have prompted calls for an overhaul of the system – but they don’t address the overall costs of providing childcare – which parents say are too much, but care providers know is too little.
For example, assuming full time care of one child at $5,000 per year, you’d be looking at just under $100 a week, working 52 weeks in the year, which is technically somewhat inaccurate as parents do take days off. At any rate, if our child minder in this example worked 40 hours a week, they’d be making about $2.5 an hour, before calculating their own costs.
From a business perspective, those costs would be their dwelling, food, arts and crafts supplies, and things of this nature that the children would be using. It’s also important to remember that most of the time parents would be gone more on the order of 10 hours a day with work, meaning we need to calculate 50 hours a week of work (plus the shopping for food, art supplies and such).
Using those numbers, and assuming at least 25% costs for the child’s needs, taxes or fees, and of course the space rental (whether it is a home or an office does not matter, as there is still an associated cost), our $100 a week works out to about $75 in actual earnings. Now divide that by the 50 hours a week this person is working, and you’re down to$1.5 per hour to have your child watched. Any child minder could earn more sweeping the floors at Tesco than he or she would make watching a child.
Even if he or she watched three children, they would still be earning more sweeping floors after benefits were considered. Add in the need to pay taxes on money earned or hire an accountant, and the whole process can seem almost not worth it to any respectable child minder.
Assuming a person was caring for three children, they’d be earning in the range of $15,000 a year gross. Some costs would be offset by the fact that they could make bulk purchases, but the thing that wouldn’t change is the space needs. In fact, those needs would increase with each new child added.
Further assume that it’s just not reasonably possible for one person to provide excellent full-time care to three children at the same time, and you have a bit of a predicament on your hands. Do you pay less for the care of your child than you do to park your car, or do you start paying more, but perhaps hire someone yourself, in your own home?
Well, according to studies in the US (http://www.learnvest.com/2013/03/do-you-need-to-pay-for-preschool/2/), preschool and managed childcare can and does improve the ability of a child to succeed. In fact, the improvements can be significant and last a lifetime – in some cases actually saving money over the life of your child’s education and the associated costs you’ll spend raising him or her.
That’s a fairly large consideration, as every extra bit of money you can save will be a little more you can save or invest. Perhaps more importantly, it’s also an indication that spending a little more now is a real investment in the growth and development of your child.
Remember that whether you have your own children, or are planning to have some in the future, the shockingly high costs of childcare are something you will need to consider at some point. This is especially true if you’re planning on teaching your child how to be a millionaire, because you’ll want to set a good financial example for him or her to follow. Get that all sorted out, and you can be well on your way to giving your children a better and brighter future.
