I’d heard all of these rumors about children being expensive, but I didn’t really believe them. We’d been parents for nearly a year and managed just fine with a limited amount of penny squeezing thanks to the extra money I’d saved while we were pregnant to allow for extra cash during my maternity leave — and then the sucker punch came. We realized just how much daycare is going to cost us for infant category twins, and I’ll just say this: it’s a LOT.
When we started crunching the numbers, over 35% of our net income will be going to daycare expenses. Thankfully our housing costs are only 25%, but things are going to be a lot tighter than they used to be. We toyed around with the idea of me remaining home, but that just isn’t in the cards right now financially and I really need some more adult interaction in my life than I’ve been getting. Even though our daughter Molly’s vocabulary is up to five words, (six if you believe she’s secretly learning German behind our backs because she yells “NEIN!” sometimes when she’s in a bad mood), it still isn’t cutting it adult conversation-wise. I also thought that I really need to give the whole working mom thing a good solid try while we work on rebuilding our pre-baby savings account.
At first I went into full blown panic mode, unable to sleep having nightmares about cheques bouncing everywhere and everything that could go wrong, then I started to take action and we came up with a plan. Here’s what we’ve come up with so far:
The Jars System
One of my favorite things to do when the minions go down for a nap is watching the television show Til Debt Do Us Part while I eat my lunch. One of the first things that host Gail does when she’s helping a couple get out of debt and/or save money is put them on the jars system. To work the jars you allocate a certain amount of money to various areas of your non-fixed living expenses: Food, Transportation, Entertainment, Clothing and gifts, Other etc. and record how you spend it. You refill the jars weekly. We have been on the jars for about a month now, and although we don’t record how we spend the money the jars have created good conversation about spending priorities, limited us to one weekly grocery trip and has curbed our late night convenience store binge substantially. The fact that when the money is gone, it’s gone has been a good motivator.
Research and negotiate with your service providers
When I was looking at our monthly bills for cable, internet and phone in addition to the fact that we were paying a significantly higher mortgage rate than what is prime right now, I started to make some phone calls. By looking at the competitors, researching bundles vs. non-bundles and knowing what we were paying, I was able to negotiate a $60 a month total savings on our internet and cable package and a lower interest rate on our mortgage that saves us $76 of interest every month. A couple of hours of time has saved us over $1600 a year. I will be researching our house/car insurance this November when our contract expires.
We are really lucky that so many friends and family have been generous enough to pass on car seats and clothing to our children, so much so that we’ve barely had to purchase anything. This has saved us endless amounts of money. It makes sense to take an inventory of what you have clothing and supply wise for the kids regularly (at least seasonally) so you can budget for what you need or add the items to birthday and Christmas lists if the timing works out. Most parents are happy to get rid of old clothing and toys — so ask your friends who have kids a little bit older than your kids. The most helpful clothing is from children about a year older than your own because the sized clothing will work for the correct season.
For items like formula, diapers and wipes, talk to a friend or family with a bulk items department store membership — most people would be happy to take you shopping for discount items you need. We’ve also started to plan meals and take inventory of our fridge and cupboards before we hit the grocery store. This has forced us to use more leftovers, get more creative and eat a lot more healthy, which is never a bad thing.
Apply for an Income Tax Deduction
Do your research on whether or not childcare counts as a tax deduction where you live. We decided that we’d much rather apply to have less tax deducted from my pay each and every pay cheque than to be cash poor all year and get a large tax return come Spring. In Canada the form is called a T1 and you can ask your employer for a copy. Fill it out and send it in as soon as you can, processing takes 2-8 weeks and they may ask for additional documentation delaying the process even further. If you’re approved your payroll will get instructions on how to adjust the tax on your income giving you the taxation benefit year-round as opposed to one annual lump sum refund. I’m currently on week four of waiting and check the mail with bated breath daily to see if/what our new, more cash lax budget will be or whether I have to provide more paperwork and start waiting all over again.
Prepare for emergencies
Our car is over 10 years old, our porch needs to be repaired, our washer moans as we process endless loads of clothing and our garage door has seen better days. Even though we can’t afford a huge emergency fund these days, we’re setting aside $100 a month for emergencies because we just know that all of these items will die within months of each other. If our tax reduction comes through with enough savings we’ll be raising this to $200.
Turn off the lights
We’ve hit that magical time of year where most of the time, save for a few days, you can leave the heat and the air conditioning off and control the temperature of the house by opening and closing windows. This in addition to turning off unnecessary lights and doing your laundry and dishes at off peak hours you can save about $30-$40 a month on your utility bills.
Walk the line
Parking at the subway station by our house/day care is $4 a day, that adds up to $80 a month. Our daycare is exactly half way between our house and our local subway station, and has stroller parking. We are hoping to walk the minions to and from daycare every day until Christmas break and a couple of times weekly once the winter hits to save some money and wear and tear on our above mentioned “antique” car.
This is what we’ve come up with so far and it’s working, for the most part. From time to time we need a few tweaks, but the system is helping us stay on track. I’m going to start an advent calendar for when Molly and Jack enter full day kindergarten and when the word “day care” can be ejected from our vocabulary. In the mean-time any additional money saving tricks and tips would be appreciated!