9 expert tips to reduce your childcare costs

Top tips from a finance expert on how to reduce your childcare costs, from finding free childcare to the government schemes you could qualify for

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Looking for ways to reduce your childcare costs? You're not alone. With the average cost of childcare in the UK soaring and families concerned about how much it costs to raise a child, it's never been more important to look at how much money you are spending and making sure you are paying the best price for childcare and getting the best value. 

According to the latest study from Coram Family and Childcare, the cost of part-time childcare for parents with children under two has increased by 5.6% since 2022. Add to that, the fact that parents are forking out an extra £1,000 a week during the school holidays, and it's no wonder parents are looking for ways to ease the pressure on their family's finances.

Goodto.com's Money Editor Sarah Handley says: "Childcare can take up a huge chunk of the family budget, but at a time when everything else is really expensive too, it can be hard for parents to make ends meet. That means it's vital parents are aware of all the ways they might be able to reduce those costs, while still getting the childcare support they need, to ease the squeeze on their finances."

Here we look at ways you can reduce the price of childcare - from how you can secure childcare for free, to the government schemes that can help with the costs.

1. Ask family or friends for help

A first step to reducing costs is to assess your opportunities for free childcare. This could be enlisting the help of family, your child's grandparents for example, who might be happy to give up spare time to look after your children. 

This is normally only works when they live nearby and there’s a good relationship between you all. They’ll also need to be retired or working part-time to find time to help. There is also question around whether the government should pay grandparents who provide childcare and help parents back to work.

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But if you do plan on asking your parents to help look after your children, you need to be able to communicate clearly, as Carol Anderson, branch banking director of TSB says: “The impact of the rising cost-of-living is becoming more widespread. For those looking to offer financial support to their children, make sure you have open and transparent conversations as a family.”

Another option you might consider is grouping with another family and working out a system where you can look after each other’s children for some of the time. If you take them for one day each, you get two days of childcare for the price of one day off work. If you work part-time, this could be a real money-saver.

For this to work, you’ll need to find one with a child around the same age, a similar approach to parenting - and the same need for affordable childcare.

2. Research free after school clubs

Organisations such as the YMCA, local authority play schemes or church groups could be good places to investigate for free after school clubs and classes.

They’re intended for parents who are unable to pick their children up after school, which can save on childcare. Services can be limited to only serving certain schools in the local area – but it’s definitely worth a look.

You can also use the government website to find after school and holiday clubs to see you through.

3. Claim Government help

There’s help from the government for childcare once your child reaches three. Currently, you can get 15 hours free childcare when you're child turns three, while some parents of three- and four-year-olds can qualify for 30 hours of free childcare per week in school term time. But this is due to change and by September 2025, and will be extended to children over nine months old.

The current set up works out as 38 weeks of the year and you can claim 30 hours with an establishment from Ofsted’s childcare register, as long as you or your other half don’t earn more than £100,000 a year. The hours can be used for childminders, day nurseries, playgroups, pre-schools and nursery schools, but cannot be used for care with a nanny. This can be incredibly useful for families that are worried about how much nursery costs.

Be prepared for some costs, however, as nurseries are allowed to ask for payments to cover the cost of things such as snacks, lunch and extra-curricular activities, like music classes.

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4. You could get extra help if you claim benefits

If you claim benefits such as income support or universal credit, there might be more help available to you earlier on. You may be able to claim 15 free hours for your two-year-old. This also applies if your children have a statement of special educational needs or are looked after by a local authority. You can find out more on the government website.

You can also put child benefits towards the cost of childcare. The government will pay £24 per week for your first child and £15.90 per week for any children after that. Since 2013, the benefit has been capped so households where one earner makes more than £50,000 start to lose some entitlement. If they earn £60,000 you don’t get anything.

5. Claim Universal Credit? Check you're claiming the childcare portion 

Universal credit is a benefit that aims to help households on low incomes. There’s a basic amount paid, but you can get extra money depending on your situation.

A childcare costs element of Universal Credit is available if both parents are working. This is up to a maximum of £951 a month for one child, or £1,630 a month for two or more children. 

Receiving universal credit is also a trigger to qualifying for the cost of living payments from the government which can help ease the pressure on your finances. So if you think you might be eligible, it's a good idea to apply as soon as possible to maximise any additional payments you might receive.

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6. Use tax-efficient childcare schemes

Childcare Support Scheme

Use the childcare support scheme – tax-free childcare – as a tax-efficient way of paying for nursery. You pay money into the online account and the government adds a top-up. For every £8 you pay into the account the Government will add £2. You can then use that money to pay any childcare provider on the approved list, which includes childminders, nurseries, nannies, after-school clubs and play schemes. 

But according to personal finance expert Laura Suter, from investment company AJ Bell, not everyone eligible for the scheme is taking advantage:  “With an estimated 1.3 million families who are thought to be eligible for the scheme, it is still chronically under-used. With the average family in the UK having 1.9 children, it means each family could be getting £3,800 on average towards their childcare costs each year – money that would go a long way to helping in the current bills crunch."

But the latest figures from HM Revenue and Customs show that uptake of the tax-free childcare scheme is on the rise, with 24% more families claiming this benefit in March 2023 that in March 2022. Commenting on the new figures, Paul Falvey, a tax partner at accountancy and business advisory firm BDO said: “It’s encouraging that more working parents are finding out about their entitlements to claim tax-free childcare and set up an account. However, the big increase we’ve seen in the last year may also reflect the fact that more working families are struggling with the cost of living and are keen to minimise costs wherever they can.

“For eligible working parents, taking advantage of Tax-Free Childcare makes good financial sense. You can get up to £2,000 a year (£500 every three months) for each of your children who are aged between 0 to 11 years old to help with the costs of childcare."

Childcare voucher scheme

If you are already in the childcare voucher scheme, it's a good idea to stick with it. This scheme is no longer available to new joiners – it closed to new applicants in October 2018. But you can still use them if you signed up before then, are with the same employer and it still offers them. 

Vouchers allow parents to pay for childcare from their income before tax and national insurance contributions are deducted, using something called salary sacrifice. That then means you are taxed on a lower amount, reducing the amount of tax you have to pay. Depending on your tax code, you could save roughly £100-200 per month. 

7. Research nurseries early

If you know you want your child to go to nursery, It's a good idea to start looking as early as you can. It’s likely you’ll find that the more affordable nurseries get snapped up fast, so you should have your child on a waiting list as soon as you can.

Be organised and do your research on nurseries in your area as they will differ in approach and cost. Aim to view three or four so you can compare the facilities and value for money. 

Make yourself known to the person in charge of admissions (befriend them if you can!) and check in at intervals to chase up how far up the list your child is. 

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8. Save on after-school childcare

When children start school, there’s still a gap to plug between when school finishes and the end of the working day. Schools usually offer after hours clubs. According to the Coram Family and Childcare, the average weekly price for families using an after-school club for five days a week is £67.42 a week, or £2,629 per year (based on 39 weeks term time)

But you might find a childminder is better value. While the average cost of a child minder is more at £72.36 a week (£2,822 a year), care is usually until 6pm whereas after-school clubs might not run as late.

9. Find cheap and free holiday activities

If your child is at school, the stretch of the six-week summer holiday can be a daunting prospect. But there are summer holiday activities which offer some form of help during the holidays for free. Check out Coram Family and Childcare, which lists organisations in your local area, where you can find information about childcare and family services. 

Your local council may also run free or cheap activities for children during the school holidays. It's worth checking its website to see what's on offer.

If you're facing high childcare costs, you might also be wondering whether it is financially worth returning to work after having a baby, and how to save money in other areas of your life to ease the pressure. 

Personal finance expert
Holly Thomas is a freelance financial journalist and writes across all areas of personal finance, specialising in investments. Holly’s work can mainly be seen in The Times, The Sunday Times and the Daily Mail. Previously she worked as Deputy Personal Finance Editor at The Sunday Times, Money Editor at the Daily/Sunday Express and also at Financial Times Business. She has won a number of professional awards, most recently Investment Freelance Journalist of the Year at the Aegon Asset Management Media Awards in November 2021. Others include Freelance Financial Journalist of the Year at the Headlinemoney Awards.
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