Can you afford daycare for another child?
Private centre, home-based care, Playcentre, kindergarten . . . the world of early childhood education is a complex and often expensive minefield. With most mums and dads in paid work by choice or necessity, the number of preschoolers in care and education facilities is higher than ever. So what should you be looking for as a parent? Tamsyn Parker reports on the costs in part three of a six-part series
When Jo was looking at going back to work after having her second child she was shocked at how much she would need to pay. For fulltime care for two children under 3 she was looking at $450 a week — and that was with a discount on the full $600 the daycare centre could have charged.
The cost of daycare for her two little ones was virtually the same as the mortgage payments on her Auckland house and, after paying for all the other costs of running a home, the family would be left struggling just to get by.
Yet once she went back to work she and her partner would be earning too much together to get any childcare subsidies.
It’s a situation familiar to all too many families and often results in some delaying their second child so they get the 20 hours free subsidy from age 3 to make it more affordable or, in other cases, one parent has to quit their job because the cost of care means it is not worthwhile their working.
For some it’s a really close call. One mum of one told a Facebook group that after paying for the costs of her little girl to be in care fulltime she was only $100 better off a week.
“If I didn’t work we would be struggling to meet our financial commitments, yet because of daycare we are only $100 a week better off,” she said.
The woman said she wanted to have a second child but the thought of two kids in daycare “scared the crap out of us” because of the cost and they couldn’t afford for her to stay home. “We have to choose between working to get by, or having the family we’ve always dreamed of.”
OECD data based on 2019 figures found that Kiwi couples on an average wage, using fulltime, centre-based care for two children aged 2 and 3, spent 26 per cent of their household income on childcare.
This is a lot more than the OECD average of 11 per cent, but Kiwis are not alone in paying a high price for early childhood services.
In Britain couples spent 28 per cent of their household income and in Ireland parents shelled out 21 per cent. Australian parents paid out 17 per cent of their household income.
Those at the other end of the scale — Germany, Norway and Sweden — have high levels of government expenditure on childcare and families pay less.
In Germany couples spent just 1 per cent of household income on childcare, Norway spent 6 per cent, while in Sweden couples paid 4 per cent.
A single parent earning 67 per cent of the average wage with two children aged 2 and 3 in fulltime care was better off in New Zealand with around 12 per cent of their household income going to childcare costs, just above the OECD average of 10 per cent.
Britain was the most costly in this case, with 37 per cent of household costs going on childcare, followed by the United States on 33 per cent and Cyprus with 32 per cent.
Peter Reynolds, chief executive of the Early Childhood Council, the body that represents childcare providers, says it is difficult to compare New Zealand’s childcare costs with countries like Sweden where taxes are very high.
Preschool care in New Zealand is also both care and education and teachers are largely qualified, which pushes up the cost of it.
“That means there are certain obligations — the carers are teachers who are qualified. But having teachers looking after the children pushes up the cost of it.”
Reynolds says for an average childcare centre 77 per cent goes into wages.
“Nobody begrudges that and that is the nature of the system.”
But he says that means New Zealand can’t be compared with other countries’ systems as easily because they have systems which are not teacher-led.
“In New Zealand it is education-led, teacherled. It is not a babysitting service.”
Unlike primary or secondary school education which is a public system, the main system of preschool care in New Zealand is private.
There are around 4500 licensed ECE services in New Zealand. Of those, 2600 are childcare centres.
Of the 1300 ECE Council members around 70 per cent are privately owned businesses and 30 per cent community owners.
“This is an expensive service to operate because of the care and education component,” Reynolds says.
Centres have a curriculum to follow and
checks by the Education Review Office they have to meet. “That sort of stuff comes at a cost.”
And those factors are important so parents know their child is safe and will be wellprepared for school, Reynolds says.
Parents complain about the cost being comparable to private school fees and that is essentially because it is private schooling.
But it has one main difference — the Government also provides funding. There is a general subsidy paid by the Government to providers depending on the service, what percentage of teachers are certified and the age of the child (see box for details).
In return for this higher 20-hour-per-week funding rate from the Government, the provider must not charge parents a fee for these hours.
But there are strict rules around using the 20-hour free service. For a start only six hours of the 20 can be used in any one day, which can make it tough for working parents.
Dr Sarah Alexander, a qualified early childhood teacher and former university academic in child development who set up the website myece to increase transparency in the system, recommends parents look at how much government funding an organisation is getting and how much they are paying on top of that to help weigh up their decision.
“I suggest to parents they look at funding rates, and depending on the funding rates and the fee on top they can consider if it is reasonable or not,” she says.
“In some cases centres are getting $12 an hour funding for a child and then charging the parents $8 on top of that. Where is this going? Parents have every right to ask questions.”
Alexander says her research shows that, on average, community-based services have lower fees compared with privately owned and operated centres which need to make a return on their investment.
But not every area has a community-based centre and travelling out of your area has other added costs.
Home-based care could also be cheaper, she suggests.
Kindergartens get higher funding from the Government because there is an agreement that the teachers are paid in line with primary teachers so that extra funding goes to paying the teachers’ salaries.
Alexander says the 20-hours system is a “bit of a have” because parents can get locked into contracts which mean their child has to be at a centre for a certain number of hours or days.
“Services can charge what they want outside of the 20 hours.”
That includes the hourly rate and optional charges for providing food or nappies.
Alexander says that means parents could either pay extra for the food or send their child with a packed lunch which could make it awkward being the only kid with a packed lunch.
Parents might also have to pay when the service is closed over the Christmas holidays or for public holidays.
Optional charges mean parents can say no to paying them but this needs to be agreed
In New Zealand it is education-led, teacher-led. It is not a babysitting service.
Peter Reynolds, Early Childhood Council
at the beginning before the child starts at the centre.
However, says Alexander, there is a huge moral obligation on parents to agree to terms in order to help smooth the way.
“No parent wants their child to be treated differently. They want their child to have a good relationship with the centre.”
Alexander believes one way the service could be made more affordable to parents is to increase the access to the Work and Income (Winz) subsidy.
The subsidy is available for up to nine hours a week for children of families if the parents/ caregivers are not in paid employment, studying or training.
Those who are working, in training or seriously ill or disabled can get a subsidy for up to 50 hours a week if they earn under a certain amount.
Households with one child can get $5.22 per hour if they have a gross income of under $800 per week or around $41,600 annually.
Those with a gross household income of between $800 and up to $1200 a week can get $4.16 an hour, for $1200 to up to $1300 a week it’s $2.91 an hour, and for $1300 to $1399.99 it’s $1.62 per hour. If your household earns more than $72,800 and you have one child you won’t get anything.
Households with two children can earn up to $1600 a week or $83,200 and get some subsidy while those with three children can earn up to $1800 a week or $93,600 before the subsidy is cut.
Some parents believe the earning cap is too low which means they have to weigh up whether it is worth working more and losing
the subsidy only to find they are not much better off financially.
Conversely Reynolds believes the funding for centres is what needs to rise to bring the costs down. He says the costs for centres have kept rising but over the past 10 years the perchild funding rate from the Government has reduced.
In the 2019 Budget the Government finally
lifted it 1.6 per cent and then 1.8 per cent.
But he says that over the past 10 to 12 years services have lost ground by 24 per cent.
“We are not going to begrudge any increase. But it’s got a long way to go to catch up.”
Kindergarten teacher pay is set to go up and that will put pressure on other centres to also increase pay, Reynolds says. “The best advice I can give is shop around.”
Alexander says a lot of new centres have been built in recent years and there is now overcapacity in some areas.
“There is a lot of competition there now.” Alexander says many parents haven’t realised there has been a change — instead of long waiting lists some centres are now undersupplied and don’t have enough children to fill their books, giving parents more negotiating power.
“Many bigger services are operating under capacity. If parents knew that, they could use it to bargain.”
She says it is in the interests of the centre to have a child in place. She says that means some centres are offering free childcare to 2-year-olds to try to get them in place ahead of the 20-hour subsidy.
“They can do that because the funding will be coming in anyway.”
Alexander says parents need to put as much value on choosing an early childcare centre as buying a car. When it comes to buying a car we will often look online and do a test drive of numerous cars.
“You just book in like you book into school and think it is uniform. But there is a lot of variation.”