How to save money on childcare: Six ways to trim the cost

As the cost of living crisis hits home for millions of people, parents are looking for ways to save money on childcare, often one of the biggest fixed costs.

Parents are paying 2.5 per cent more for childcare than last year, with part-time nursery place costing a whopping £7,000, while full-time childminding could set you back a staggering £11,000 a year, research suggests. 

Meanwhile, single-parent households are expected to be hit hardest by the cost of living crisis, as a third have said they have been forced to cut back or go without food or heating to afford the rising costs.

Single parents are worried about the cost of living crisis, as a third have said they have been forced to skip meals or forgo their heating in order to afford everyday essentials

Indeed 95 per cent of single parents have been worried about the rising cost of essentials over the last 12 months, compared with 57 per cent of adults as a whole, research carried out by Savanta ComRes on behalf of Gingerbread shows. 

Single parents were also found to be twice as likely to have felt depressed because of money worries, with more than half of single parents seeing their financial situation worsen, while two in five expect things to get even worse over the coming year. 

Which? has rounded up a number of ways to help cut the costs of childcare and alleviate stress for working, single, or struggling parents. 

While the best money-saving options depend on personal circumstances, there is some government and local support available to those who may be struggling.

1. Working parents can claim tax-free childcare 

Tax-free childcare is a government scheme that pays working parents a top-up based on their childcare costs.

You could receive up to £2,000 per child per year in quarterly instalments. If you have a disabled child, you can receive up to £4,000 per child – that’s up to £1,000 every three months.

You, and any partner, must be over 16 and each expect to earn at least £152 per week – equal to 16 hours at the National Minimum or Living Wage.

If you, or your partner, are on maternity, paternity or adoption leave, or you’re unable to work because you are disabled or have caring responsibilities, you could also still be eligible.

Unfortunately though, you can’t get Tax-Free Childcare if either you, or your partner, individually expect to earn £100,000 or more.

2. Check if you’re eligible for tax credits or Universal Credit 

Both Working Tax Credit and Universal Credit offer extra support for families, where the government gives the recipient extra money towards paying for childcare.

To qualify for Working Tax Credit, the person claiming, and their partner, must both work at least 16 hours a week. 

One person can be out of work if they are entitled to carer’s allowance, in prison, in hospital, or incapacitated. 

It is possible to save up to 70 per cent of childcare costs, up to a maximum of £175 per week for one child, or £300 for two or more children.

Similarly, people claiming Universal Credit can get 85 per cent of their childcare costs covered, to a maximum of £646 a month for one child, or £1,108 for two or more children.

3. Take advantage of free childcare hours 

In England, there are schemes available for parents with very young children. 

The ‘free childcare for two-year-olds’ scheme is for those who receive certain benefits. In addition, everyone is eligible for 15 hours of free childcare per week for children aged three or four. 

This is for 38 weeks a year, but parents can opt to take fewer hours to spread this over more weeks. 

Those on lower incomes might be able to claim 30 hours of free childcare a week, as long as they and their partners are earning at least the national minimum wage or living wage.

In Scotland, all three and four-year-olds are entitled to around 30 hours of free childcare a year. There is also a scheme for two-year-olds for those on certain benefits and low incomes.

In Wales, all three and four-year-olds can get 30 hours of free childcare a week. The 30 hours is made up of a minimum of 10 hours of early education a week and a maximum of 20 hours a week of childcare.

In Northern Ireland, three and four-year-olds get 12 and a half hours of free childcare per week during term time through a funded preschool place.

Parents are concerned about paying for childcare, as a part-time nursery place for one child costs a whopping £7000 a year

4. Don’t forget about child benefit 

While not childcare specific, child benefit payments from the government can help ease the cost of childcare. 

For the 2022-23 tax year, parents can claim £21.80 for their first child and an extra £14.45 a week for any additional children. 

Parents will be paid child benefit until their child turns 16 – or until they turn 21 if they’re in an approved form of education or training.

It is worth noting that child benefit is not means-tested. However, if one parent earns more than £50,000 a year, they will incur a tax charge on the money received. 

If they earn more than £60,000 a year, they will have to pay back all of the benefits received. 

Even so, Which? suggests it is worth registering and just opting out of the payments, as parents will receive National Insurance credits while they are off work.

5. Get grandparents involved or try parent-sharing

Grandparents are often the first port of call to help with childcare, although many are unaware that they might qualify for benefits as a result. 

For grandparents who are not already retired and looking after a child under the age of 12, may qualify for National Insurance credits, and time spent caring counts towards their state pension eligibility.  

Another option is to share your childcare duties with a friend or fellow parent.

For parents with friends who have similar schedules and childcare needs, a cheaper or free childcare option is to consider looking after each other’s children. 

While this erases the advantage of professional childcare, it can also allow children to socialise with others, and can save you both thousands of pounds a year.

Local charities and childcare trusts can offer a number of free or affordable activities to help keep kids happy and support parents who are worried about rising costs

6. Find cheap activities with local charities

Many local councils offer free events and activities during school holidays, so it is worth checking the relevant sites.

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

These are intended for parents who are unable to pick their children up after school, which can save a lot of money compared to a nanny or childminder. 

However, services can be limited to only serving certain schools in the local area.

You can also talk to your child’s school to see what options they would be ableto provide you with to help support you and your child.

School-based clubs or hobbies could be a great way to help your child develop a life-long interest or skills, as well as their social skills, but they can also offer you a few extra hours every week of childcare. 

Reena Sewraz, Which? Money expert, said: ‘The cost of living crisis is putting a huge strain on household finances, with millions of families struggling to make ends meet.  

‘Childcare is a necessity for working parents but can be extremely expensive. In many cases, it is one of the biggest financial commitments after housing costs, so it is extremely worrying that many are struggling to pay for it.

‘There are a number of schemes available from the government to help alleviate some of the costs of childcare. However, these won’t be an option for everyone. 

‘There are also alternative ways to save money, such as parent sharing or asking family members to help out, while local charities and councils might also offer free after-school clubs and classes.’