CASH-STRAPPED families say they’re racking up thousands of pounds worth of credit card debt because of unaffordable childcare fees.
Childcare fees vary wildly depending on where you live but the average monthly cost for a child under four is now a whopping £1,042 per family, according to a new study by Noddle.
And despite the Government’s various schemes to help working parents, including up to 30 hours of free childcare a week for three- and four-year-olds, families say it’s still not enough.
Jane and Chris Blackwood, who live in York with their kids Polly, 5, and Bill, 3, say they have been forced into £7,000 of credit card debt after pricey childcare left them unable to pay the bills.
‘We spend £2,000 a month on childcare’
The couple spend a mammoth £2,000 a month – or £24,000 a year – on childcare while Jane, 35, a former lawyer, goes to work as a university lecturer and Chris, 35, goes to his communications job.
Chris earns £55,000 a year, while Jane earns £24,000.
Jane said: “When Polly was born we lived in London and even though our nursery bills were £1,600 a month it wasn’t so hard because I was in a highly paid job at a law firm.
“When Bill was born we moved north and I started lecturing, which isn’t as well paid. In preparation for my pay cut we had saved around £8,000.
“We knew that the cost of two kids at nursery was going to be far more than we could afford from our normal monthly income.”
What help is available for parents?
CHILDCARE can be a costly business. Here is how you can get help:
- 30 hours free childcare – All three and four-year-old children in England are eligible for 15 hours of free childcare. Parents of three- and four-year-olds can apply for can apply for up to 30 hours of free childcare a week as long as they work at least 16 hours a week at the national living or minimum wage and earn less than £100,000 a year.
- 15 hours free childcare – In England, two-year-olds can get free early education and childcare if you’re on certain benefits.
- Tax credits – For children under 16, some working families can get up to £122.50 a week depending on their income to help with childcare costs.
- Childcare vouchers – If your employer offers childcare vouchers you can get up to £933 a year in tax and national insurance savings. You pay for your childcare before your tax contributions are taken out. But be aware that this scheme is now shut to new joiners.
- Tax-free childcare – Available to working families and the self-employed, for every £8 you put in the Government will add an extra £2.
- Universal Credit – Parents in receipt of Universal Credit can claim up to 85 per cent of their childcare costs for children under 17.
The Childcare Choices website can help you find out what you may qualify for.
But the family’s money ran out fast leaving them with no choice but to take out a credit last year to pay for everyday costs including grocery shopping.
They also used the card to refurbish a bathroom that was in urgent need of repair, and to pay for Christmas.
Jane said: “We basically used the card for anything that didn’t need to be paid in cash.”
Research by credit scoring firm Noddle reveals that the Blackwood’s are not alone in having to rely on credit to see them through childcare costs.
‘We want to get rid of the debt before the interest soars’
Over a quarter (28 per cent) of parents rely on credit to meet steep costs while children are in childcare – including those with higher incomes.
Families accrue on average £9,220 of debt before their children reach primary school age, according to Noddle.
And once these costs have subsided, it takes families an average of 16 months to recover from the debt.
“Our credit card has a 0 per cent interest rate period which runs out this time next year,” said Jane.
“With Polly having started school and the fact we should soon receive funding for 30 hours a week for Bill, some money will be freed up.
“With the savings we’ll make, we can focus on chipping away at the debt. We really want to get rid of it before the interest rate soars.”
More than half of parents (52 per cent) in the study admit that they were underprepared for the financial cost of childcare and a similar number (55 per cent) say that the years they relied on childcare have been or are currently the most financially challenging time of their lives.
Many admit to having to make major sacrifices, with 73 per cent of parents cutting back on holidays and leisure activities to afford childcare.
‘Childcare fees were double our mortgage’
Ben Glover and his wife Alex from Middlesbrough can testify to that. The couple have three children – Indie, 13, Matilda, 9 and Charlotte, 4.
Ben, 35, who earns £36,000 a year from his job as a project manager for a telecoms firm, said: “When Indie came along we had lots of support from grandparents and childcare bills were about £300 a month – so not too scary.
“When Matilda came along Indie was at school, so the hardest time was when Charlotte was born and we needed to pay for two children at nursery.
“It cost us £1,200 a month which was double what we paid on our mortgage at the time.
“For a while we kept on with our same levels of spending, and ended up racking up huge credit card bills of around £5,000. We realised that we needed to make some big lifestyle changes.”
Ben and Alex, 37, who earns about £32,000 from her job as a primary school teacher had to put a freeze on nights out, takeaways, and they didn’t have a family a summer holiday for four years.
“Instead of a holiday we would just do day trips to theme parks in the UK using a scheme through work where you could get entry at a big discount.
“We managed a few camping trips, but that was it. It was really tough and took some serious discipline.
“We even traded in our cars for one larger family car to save money. But that ended up being a real false economy in the end as we needed to do lots of journeys in a car that was much less fuel efficient.”
Ben and Alex took out a consolidation loan [FROM WHERE? WHY?] to pay off all the credit cards, which they finally did a couple of years ago.
The Noddle study shows that the majority (70 per cent) of parents say their childcare provider has increased rates in the last year.
“It really hurts when the fees suddenly go up,” recalled Ben. “After the credit crunch salaries were frozen but the cost of childcare was soaring.”
Parents report that cost increases are being justified by nursery providers as a response to inflation, wage growth or Brexit uncertainty.
The burden of the cost of childcare continues to bite – and many parents blame the Government for a lack of sensible support.
‘Help should be offered when a child turns one’
Jane said: “The existing system is unfair on hard working families. The fact you have to wait until a child is aged three to get any support is ridiculous.
“For those who have a year off work after their child is born, there’s still two years of childcare to pay for before help kicks in.
“Instead of funding for 30 hours a week at the age of three, it would be more helpful to have 10 free hours a week from when the child is one.”
Ben says that there wasn’t even Government help available with his first two children – the 30 free hours a week only came into force in time for Charlotte – of course, this was a different Government to the current one.
“The only help as such for Indie and Matilda was the childcare voucher scheme which we used to make a saving on tax. But that wasn’t a huge amount.
“We still got into debt. It’s a complete shock to your finances that little can prepare you for.”
Children and families minister Nadhim Zahawi said: “We are investing around £3.5billion on our early education entitlements this year alone – more than any previous Government- to help parents with their childcare costs so that every child has access to a high quality early education.
“More than 700,000 of the most disadvantaged two-year-olds have benefited from 15 hours free childcare since 2013, and more than 340,000 three and four year olds benefited from our 30 hours offer in its first year, meaning parents are spending less on childcare or are able to work more flexibly.”
More on childcare
Thousands of nurseries have raised their fees as the Government’s free childcare scheme backfires on parents.
To help, we’ve rounded-up the childcare help worth £5,000-plus parents may be missing out on.
And be warned that new parents risk a £200 fine by not registering their kid’s birth – plus six more money saving tips.
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