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Is Daycare Cheaper than a Nanny? (Full Price Breakdown)

Is Daycare Cheaper than a Nanny?

2 Jun 2020

 Matthew James Taylor

Written & Illustrated by
Matthew James Taylor

 Renee Irving Lee, B.Ed.

Reviewed & Edited by
Renee Irving Lee, B.Ed.

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What kind of childcare should you choose for your child - daycare or a nanny? A big factor for you might be the cost.

Putting your child in daycare will be cheaper than hiring a nanny for the same number of hours per week. This is because daycare workers look after multiple children at once, bringing the total cost down per child. However, sharing a nanny with another family can a comparable alternative.

In this article, I'll talk about the costs of both daycare programs and hiring a nanny. You'll discover the pros and cons of each, plus some alternatives to both that you might consider as well.

How Much Does Childcare Cost?

There's really no easy and straightforward answer to this question, whether you're considering a daycare or a nanny. There are lots of different variables you need to consider, such as:

  • What kind of childcare you're choosing.
  • Your child's age.
  • Where you live.
  • How many hours each week your child will spend in childcare.

Of the various factors, where you live is by far the most important, at least if you are in the United States.

How much a nanny costs in rural Idaho will be significantly less than in New York City, just because of the cost of living and wages in each area.

Daycare is similar, whether you're looking for one in somebody's house or in a center. Daycare can cost triple or quadruple as much in an expensive city compared to a cheaper one.

It's best to check with friends and family in your area to get an idea of what the going rate is for different types of childcare.

How Much Do Daycare Centers Cost?

Daycare costs more during the baby and toddler stages. Younger children need a lot more hands-on care, which means either smaller groups or more caregivers per child.

For an infant, daycare costs can vary from $5,000 to $17,000 per year depending on where you live.

For preschool-age children, you'll pay a bit lower. Between $4,000 and $13,000 per year for a 4-year-old.

That's for the United States.

In Canada, childcare costs are rapidly growing, usually faster than inflation. Childcare costs vary even more drastically in Canada, from less than $200 per month in Quebec (about $2,000 per year) due to government regulations, to $1700 per month ($20,000 per year) in Toronto, 10 times as much!

In Australia, full-time daycare costs about $972 per month on average (about $12,000 per year.) Although depending on where you live, the amount you pay could exceed $1,500 per month.

In the UK, the average cost of sending a child under two years old to a daycare or nursery is about £120 per week for part-time or £230 per week for full-time care. That's £6,000 to £12,000 per year, or converted to American dollars, $7,500 to $15,000.

Top 5 Most Expensive And Cheapest US States For Childcare

Here are the top 5 least and most expensive US states when it comes to childcare according to the EPI (Economic Policy Institute.) These numbers are the average annual cost for one child. They're from 2016 and represent the cost of care for infants up to three years old.

Top 5 Least Expensive US States For Childcare
# US state Cost/year
1 Mississippi $4,825
2 Alabama $5,600
3 South Dakota $5,650
4 Louisiana $5,750
5 Tennessee $5,850
Top 5 Most Expensive US States For Childcare
# US state Cost/year
1 Washington, DC $22,600
2 Massachusetts $17,000
3 Minnesota $14,300
4 New York $14,100
5 Maryland $13,900

How To Find A Daycare In Your Area

In the United States, you can find a daycare through your local Child Care Resource and Referral Agency (CCR&R.) There are more than 850 CCR&R locations across the United States that provide families with local childcare options, resources, and other information. Visit childcareaware.org or childcare.gov for more information. Their websites have helpful tools that can help find daycares in your zip code, and also tell you the average cost of daycares in your area.

In Canada, each province has its own website to help you find, choose, and pay for childcare in your area. For example, in Ontario visit ontario.ca/page/find-and-pay-child-care.

In the UK, you can use services like childcare.co.uk or visit gov.uk/browse/childcare-parenting/childcare.

In Australia, you can use childcarefinder.gov.au to find a daycare near your address. There are also several private companies with websites that offer a similar service.

If you know any other parents in your area, it's good to check with them and see if there's a specific daycare that they've used or recommended as well.

How Much Does A Nanny Cost?

The bad news is that hiring a nanny is usually the more expensive option compared to paying for daycare.

In addition to paying them a salary or hourly wage, you also become an employer when you hire your nanny. That means you've got to issue them a paycheck and deduct taxes and other benefits like social security and unemployment. In many cases, you'll also be required to match the expenses that your nanny pays as an employee.

Not only does it cost more, but it can be a lot more administration work to keep track of as well.

A qualified nanny can cost anywhere from $400 to $700 or more per week ($1,700 to $3,000+ per month) depending on where you live. And that's before taking all of the other payroll benefits into account. You might also want to offer extra benefits like health insurance, vacation and sick days, or paid holidays.

If you've got a live-in nanny that might be a bit lower, although then you're providing room and board to compensate for it.

Like a daycare, a nanny's pay varies based on a number of factors including your geographic location, as well as their education level, years of experience, and other items.

The average hourly rate for a nanny in 2017 was $19.14 USD per hour. Unlike babysitters, nannies typically work set weekly hours as opposed to on an "as needed" basis.

Nannies earn the most in San Franciso CA, Boston MS, and New York City NY. Around $18 per hour in those areas. The cities where nannies earn the least are Phoenix AZ, Tampa FL, and Detroit MI with rates of around $11 per hour or even lower.

Those rates are based on families with two children. More kids are more work, especially when they're in different age ranges. So your nanny will probably expect an extra $1 or $2 per hour for any extra children.

Canadian Nannies

In Canada, the average salary for a nanny is around $25,000 per year or $13 per hour. Although just like in the US, this can vary quite a bit depending on what city you live in, and your nanny's credentials.

British Nannies

Nannies in the UK (excluding London) earn between £8 - £10.50 per hour ($10 - $13.50 USD per hour.) A live-in nanny earns from £5.50 - £11.50 per hour ($7 - $14.50 USD per hour.) On the lower end, a live-in nanny earns less, but they also tend to be more qualified or have more responsibilities and at the higher end of the range can earn more than a live-out nanny.

Nannies cost the least in Northern Ireland and Wales, around £8 - £9 per hour. And charge the most in London where the cost of living is the highest, averaging over £12 per hour.

Australian Nannies

Australia has legal requirements and minimums that a nanny can be paid. Any nanny over 21 years of age must be paid at least $18.93 per hour. This number may be even higher in WA.

Most families, however, pay their nanny between $20 and $30 per hour. There might be extra costs as well such as domestic worker's insurance or agency fees. However, parents can also qualify for a means-tested Child Care benefit subsidy of up to $0.60 per hour for each child if they're using a registered nanny.

Expect to pay around $400 to $1,000+ per week for a nanny in Australia. For a live-in nanny, wages are a bit lower at $280 to $450 per week.

If your babysitter works 30 hours or more per week in Australia, there's also a statutory requirement to pay superannuation. This is currently 9.5% of your nanny's gross pay, which will be increasing to 10% in 2021.

Factors That Influence The Wage Of A Nanny

  • Their experience.
  • Number of children.
  • Age of children.
  • Responsibilities, roles, and tasks.
  • Qualifications.
  • Live in or live out.
  • Nanny share between families.
  • Location (city, regional, or rural locations, and even between different areas of a city).

A nanny typically works 40 to 60 hours per week. About half of families pay nannies overtime at a rate of time and a half their regular pay.

Nannies typically prefer to be paid an hourly rate rather than a set wage. That's because there can be a lot of variation in their start and finishing times. They can work long shifts, and they're essentially always on call.

Alternatives For Working Parents And Extra Ways To Save

Childcare costs are expensive and represent a sizeable portion of a new family's budget. Some parents are looking at alternatives and opting not to use a daycare or nanny to look after their children!

Here are some other options.

Becoming A Stay At Home Parent

Some parents choose to give up their career and become a full-time caregiver for their child. If you've got a partner who works and your wage is relatively low, this can make a lot of sense.

If you're working at a minimum wage job or don't earn much more than that, it might defeat the purpose of working if your nanny or daycare costs you almost the same amount each month that you earn.

Even if daycare or nanny costs are only 50% of your take-home pay, when you take the extra stress and pressure of your job into account, it might make more sense to leave your job and become a stay at home parent.

Being a stay at home parent can save your family $10,000 or more each year on childcare costs if you're watching your child full-time yourself instead. The downside is that you lose your previous income from your job. But for a low paying job, you might actually come out ahead to stay home instead.

Work From Home

More than 40% of all employees now work remotely. With employers more flexible than ever, working from home is one potential solution. Employers don't care so much about how or where you get your work done anymore, as long as it gets done.

This might not be feasible if you've got a very demanding job or one where you can't quickly step away from your computer if something comes up. For example, if you spend a lot of your time on the phone as part of your job.

For jobs like these, getting a part-time babysitter or another form of caregiver might be a good option that balances the pros and cons of being a stay at home parent versus using external forms of childcare.

Nanny Shares

A nanny share is pooling together with friends, family, or other parents to get one nanny to watch your children. This can greatly decrease the cost of childcare for everyone that uses it.

Some workplaces even offer on-site daycare at your place of employment. This kind of daycare makes it convenient to drop off your child and pick them up at the end of the day without having to make an extra stop. Plus you can even check on them during your lunch break if you want. Most employers that have on-site daycare let you deduct fees for the service before tax on your paycheck for extra savings.

A Dependent Care FSA

A dependent care FSA (flexible spending account) lets you contribute pre-tax dollars from your pay to eligible childcare costs. Services you're allowed to use this kind of FSA for include daycare, preschool, day camps, and more. By taking childcare costs out of your pre-tax earnings, you end up paying less tax and other payroll expenses since your total taxable pay each period is lower.

Child and Dependent Tax Credit

Most countries have some form of childcare tax credit. These credits reduce your tax bill dollar for dollar for the money you spend on childcare during the year. It can save you hundreds or thousands of dollars each year.

There are different limitations and restrictions, as well as special circumstances that you'll need to consider before claiming childcare tax credits. For more details, check out my article on babysitter tax and writing off babysitter expenses.

Daycare vs. Nannies – Pros vs. Cons

Deciding who will watch your baby is a stressful decision for any parent. It can also be a confusing and emotional one.

Some parents aren't ready to go back to work when their paid maternity leave time runs out, but have no other choice. There aren't many childcare options available in that case, especially for an infant. Putting them in a daycare center or hiring a nanny to watch your child at home are the two most popular choices.

Each of both daycares and nannies has its own pros and cons. What's most important is to find the childcare option you're most comfortable with and that you think your baby will thrive in. Looking at both the positive and negative aspects of each can help you to decide what's best for your child and your family.

Daycare Program Pros

Lots of aspects of daycare make them a great option.

Social skills. Daycares help children to build social skills that will help them once they're old enough to go to school and also for the rest of their life.

Interacting with other children is something that is much more difficult for your child to get at home with a nanny unless you make a concerted effort to have them attend playgroups and other social activities. It's a different kind of stimulation that they can't get in the home.

Cost-effective. Daycares can offer their services at a lower cost than a nanny because they have multiple children for each staff member. The hourly rate of their employee gets spread across potentially five or more different kids and families. For that reason, daycare tends to be more affordable than hiring a nanny.

An in-home daycare usually costs less than a traditional daycare, but it might not have the same licenses and accreditations.

More resources. Daycare centers are stocked with tons of resources for children. They offer a huge variety of play equipment, games, books, and toys. More than you have at home. They also have plenty of dress-up outfits, building blocks, educational games, and art supplies to give your child lots of opportunities for creative play.

Some daycares even bring in third-party staff to teach children specialized things like yoga or music! Your child gets access to all of these extras in your fees in addition to just having someone watch your child, and you don't have to pay more for supplies.

Higher regulations. Licensed daycare centers have to follow federal and state regulations. They are inspected and have to pass different requirements for safety, space issues, sanitation, and staffing. Ask your daycare center about their license and if they've been accredited by an organization like the NAEYC (National Association for the Education of Young Children) or your regional equivalent.

Multiple adults. Daycare centers have several staff members who might have training in early childhood education or child development. Your children will be watched by a group of teachers and form relationships with all of them, instead of just one nanny.

Daycare Program Cons

Here are some of the drawbacks of putting your child into a daycare program.

More exposure to illness and germs. Since there are many different children sharing toys and other objects, germs are a lot more common in daycares than what your child would be exposed to at home. Kids are always wiping their noses and then touching toys, or putting objects into their mouths.

Expect your child will become sick more often per year if they're in daycare than if they weren't. On the bright side, there's some science to show that being exposed to germs early on can give you better immunity later in life!

Accidents. Even with multiple adults supervising your children, it can be difficult for daycare workers to keep an eye on every child at all times. That makes falls, bumps, and bruises more common in daycare. Your child is also at risk of getting bitten by other children.

Set hours. Daycares open and close at a certain time each day. If you're late to arrive and pick up your child, there will be additional charges. If you've got a job where it's hard to leave at a certain time every day or your schedule changes, a daycare might not offer enough flexibility for you.

Sick policies. Daycares have sick policies, and they're often strict about enforcing it. If your child has an illness, you'll need to find other childcare arrangements or take time off work to look after your child yourself. You'll also have to pick them up from daycare and take them home if they become sick during the day.

Daycare can overwhelm some children. There's a lot of noise and other stimuli in a daycare. Depending on your child's personality, they might get overstimulated or overwhelmed in such an environment. Your child might also pick up bad behavior from other children they're around.

Nanny Pros

Nannies can be a great choice if you want more of a one on one environment for your child.

More control. Your nanny watches your child in your home. You have control over their schedule, what they eat, where they go, and what they get exposed to. Nannies usually give a report of what your child has been up to during the day.

Better logistics. You don't need to drive your child to daycare to drop them off and pick them up each day. Your nanny is in your house and can feed your children breakfast if you're late and need to get out the door. It's also more convenient since you don't need to pack lunch or pumped milk every day.

More flexible. You can set hours for your nanny to work that fit your schedule. You might not work a regular 9 to 5 and need someone that can watch your children in the evenings. A nanny is less likely to care if you're a bit late or get stuck in traffic.

More consistent care. Daycares have a high turnover. Usually at least one caregiver will leave each year, which can be emotional for your child to lose people they've bonded with. Nannies usually work for one family from when a child is born all the way until school age.

More individual attention. Your nanny is concentrated on only your child and their development. They give your child one figure in their life to attach to, and they can develop a special relationship that will make your child feel more comforted and secure.

Nanny Cons

Nannies aren't without some downsides of their own either.

Cost. Nannies cost more than a daycare center. If you have multiple children, the cost might be better spread out, but for one child a nanny can be costly. Although you might be able to arrange a nanny share with another parent.

Dependence. If your nanny shows up late or is sick, you don't have any kind of backup plan. You can't control if a nanny is late and you'll have to watch your child and be late for work until they arrive. If they're sick, you'll have to stay home and watch your child yourself or find a temporary babysitter.

Not regulated. At least in the US, nannies don't need any specific license or education. Most nannies have CPR and first aid, but not all of them. So it's important to run background checks and screen your nanny carefully. This is less of an issue in countries like the UK and Australia where caregivers have some form of government approval system.

Conflicts in parenting style. If your nanny disagrees with you on naps, discipline, or other parenting issues, it can be hard to deal with. Consistency between you and your caregivers is important for your child's development, so it's critical to find a nanny that's on the same page as you.

You're an employer. You aren't just buying a service or paying a contractor. When you have a full-time nanny, they're your employee. That means you've got to keep track of their taxes and other benefits, as well as issue them a paycheck. Having a good contract between you and the nanny is important.

When it comes to deciding between a nanny or a daycare, sit down with your partner and list the most important things for your family. Be honest about what your wants and needs in a caregiver are, and consider things that might be frustrating about one type of caregiver or another.

Neither decision is permanent, so you can always change your mind if you need to.

Related Questions

Should I pay a relative to care for my child?

That's a hard one. You should pay, but it can be hard to get relatives to accept your money. Some family members, especially your parents, might refuse payment and say it's their duty to help take care of your children. If that's the case, you might want to give them some other type of compensation. Buy them flowers, give them gift certificates for a restaurant, or help them with their yard work or household chores in exchange.

Is Childcare Reform Coming?

Recently, many leaders and policymakers have started to point out that the cost of childcare is rising at a rate that's unsustainable for lots of American families, especially those with lower paying jobs. In more than half of states, childcare for an infant now costs more than college tuition! For that reason, it's not unreasonable to expect some kind of government intervention or reform to help low-income families with childcare in the near future.

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