A Matter of Money -Expenses

In my last post I wrote about the daily rates charged by various home based childcare providers but that barely begins to cover how widely net incomes can vary. I know some home based providers try to break down their income to an hourly wage and lament they earn less than minimum wage. I’ve also heard it said that unlike centre based ECE’s whose wages and hours are set by their employer, home based providers have more control over their income, expenses and hours. For this scenario let’s ignore the differences in number of spaces, the ages of the children in care, daily rates etc. Let’s just consider how expenses and work hours can affect a home based childcare provider’s income. What can be controlled and what can’t be.

The Childcare Space – the building in which it is located. A portion of the cost of the childcare home’s utilities, taxes and mortgage interest is considered a business expense but the amount is dependent on how much of the home is used for childcare and for how many hours per day. Do they have a large dedicated childcare space or shared childcare/personal space? What type of neighbourhood is the home located in (property tax rate)? Has the home been purchased recently or is it nearly paid off (mortgage interest costs)? Is the home large or small, old or new, energy efficient or old technology (utility costs)? All those factors will affect the total cost of operating the childcare home.

Does the childcare home have limited hours, offer flexible hours to accommodate parents working various shifts or maybe they are even ‘open’ 24 hours/day, 7 days/week. Offering extended hours does not generally increase income – in fact, the net income could actually be lower. Drop off times for evening childcare are usually earlier than pick-up times for daytime care so enrolling one evening child and one daytime child will still require two spaces due to the period of time they overlap. The provider does not have all the children present at the same time which results in a longer workday and higher expenses too.

In short – more space & longer hours = more deductions and lower net income.

The Learning Environment – my personal favourite topic – the toys, equipment and furnishings in the childcare space. Is it set up as a traditional home – living room, kitchen, bedrooms etc – are there simply a few toys stored in a corner, spare room or a closet? Is the home larger than the family that lives there needs – an extra room or unused basement has become childcare space. Has the provider given up much of their personal space to create multiple classrooms?

Did the provider make no real changes to their own space and simply accommodates the children like part of their extended family? Did they convert a large space into an elaborate facility – purchasing expensive, high end equipment and furnishings designed specifically for commercial childcare facilities? Did they opt for more economical furnishings and take the chance they will need to replace things often? Do they design and make their own toys and furnishings using recycled materials – very little expense but a lot of ‘unpaid’ work hours.

How long has the childcare program been operating at this location? How long do they intend to stay in business? Does/did the provider have their own children who have outgrown items which are now used for the childcare program? Is this a primary or secondary income for this household? All of these factors will impact the amount the provider has already invested or is willing/able to invest in the space now or in the future.

The Programming – what types of activities do they offer? Structured or spontaneous? Formal instruction or free play? Do they have all the latest technology available for the children to use with purchased curriculum software? Do they have regularly scheduled field trips, hire instructors or attend group classes for music, recreation, or art? Do they use printed worksheets, packaged product crafts, or watch movies/TV? Some of the most expensive activities will require the least amount of provider time/effort.

Training/networking – does the provider regularly attend workshops, conferences and meetings with other educators? These types of learning opportunities allow the provider to increase her own skills and be less likely to need to outsource programming. However, they can also be expensive. For the home provider there is not only the cost of course registration but also wages for substitutes, lost income for closures, or additional unpaid time after regular work hours.

Supplies – what does the provider require the parents to send with their child? Certainly parents are responsible for sending personal items like clothing, diapers and possibly bedding for their child but some providers may also have an additional supply list. These periodic supply lists can include items such as tissues, sun screen, glue, paper etc much like annual school supply lists. Some even ask parents to supply grocery staples like boxes of cereal, crackers, pasta etc or to pay additional fees for some provider supplied items or services.

Meals – does the provider supply all or some meals or is the parent responsible for sending food with their child every day? Many providers supply snacks but some also provide breakfast/lunch/supper depending on their operating hours. If they provide meals do they buy/prepare food in bulk to save money? Do they purchase individual serving sizes and many processed items to save time? Do they seek out the best quality, organic products that can be found locally? Do they offer alternatives for children/families with dietary restrictions?

What other tasks may a provider be willing to pay someone else to do? Bookkeeping/accounting? Cleaning? Again, this is a matter of making a choice between higher expenses/lower net income or longer work hours/higher net income. A provider may not feel it is necessary to pay high premiums for disability insurance and benefit packages if they have a spouse with coverage. If childcare is the main or only income for the provider’s family then this insurance may be essential – or the premiums may be beyond the possibility of their limited budget.

So yes, home based childcare providers do have some control over how much or how little they spend on operating expenses for their childcare facility and how much they leave for salary. I think what is more important to note is WHY the providers are making the choices. Maybe the provider enjoys cooking for the children in her care or maybe she knows the food she gives them is the only healthy food they will get that day. Maybe childcare is the only income for this provider’s family and the budget is too tight to afford any ‘extras’ for the program. Maybe the provider enjoys working with children but the second income isn’t a necessity for her family – she spends more on her program specifically to lower her taxable income.

A long time ago I was told that childcare centres spend about 80% of their income on wages for their staff – I assume that number is still fairly accurate today. Maybe home based providers should try something similar.  Stop trying to take what little money is left after expenses, dividing it by the hours they work and complaining that it is not a livable wage. Instead, try counting 80% of your total gross income as your salary and pay the appropriate taxes on that income. Then take the remaining 20% and use it for your program expenses. Then you can start complaining about how little you money you have to operate a quality childcare program.

A Matter of Money – Home Based Childcare

The first post in this series was ‘Motivation’, the second was ‘Centre or Home’.  For this third installment I want to focus strictly on the financial side of home based childcare – the income. Home based childcare incomes can vary greatly dependent on your neighbourhood, the ages of your own children and the children in your care and the type of program you offer. First let me define the types of home based childcare:

Family Child Care – located in the providers home – may have a maximum of eight children, of whom no more than five can be under the age of six, and no more than three may be less than two years of age. The child care provider’s own children are included in these maximum numbers. All FCC homes must be licensed and inspected but they have the option of being funded or unfunded – more on that later.

Private Home Day Care – is also located in the caregivers home but is not licensed or inspected. They may offer care for a maximum of four children under the age of 12, with no more than two children under two years of age including the caregivers own children. If there are more than four children in the home at any time the home must be licensed. Unlicensed homes are never able to receive any type of funding from the Province.

Group Child Care Home – A group child care home is run by ‘two’ licensed providers in one of their homes. A licensed group child care home can accommodate as many as 12 children under the age of 12, of whom no more than three may be less than two years of age. These homes also have the option to be funded or unfunded.

Now let me talk a little about income.

Unlicensed/private home day care providers are free to set their own childcare rates – they can choose to charge hourly, daily, weekly or monthly. They can offer discounts to parents with more children. They do not have to charge all parents the same rates and 100% of their income comes directly from the parents using their services. They can be trained or untrained. They have absolutely no regulations regarding their childcare space, equipment, hours, or programming.

Licensed providers who operate funded programs receive an annual operating grant to supplement their income. A funded provider may not charge any parent – subsidized or not – more than the maximum, government set, daily childcare rates. Set rates for trained providers are slightly higher than those for providers without their ECE II/III classification.

These maximum daily rates have only increased by about $2/day in the past 20 years. The rate that parents pay for before/after school care is only eighty cents per day higher than it was when I first opened my childcare home in 1997. These daily childcare fees are kept low to ensure that childcare is affordable for low/middle income parents. Funded providers receive wage increases primarily through increases to operating grants. Current grant amounts work out to about $2/day for school-age children up to $6/day for infants.

Licensed providers – either family or group – may also choose to be unfunded and then – like private providers – they are also able to set their own childcare rates. Unfunded licensed providers may accept subsidized families but the maximum subsidy payment is usually far less than what the provider’s regular rates are. The provider may require subsidized families to cover the additional costs but it is unlikely that the families could afford to.

It is rare for a licensed provider in a higher income neighbourhood to choose to be funded. Many of them can charge rates that are double or even triple the amount of the subsidized fees and operating grants combined. Even unlicensed/private home providers can often charge rates that are considerably higher than the combination of parent fees and operating grant that a licensed, funded childcare provider earns. In some upscale areas the rates can be $80/day for care for preschool children or $25/day for before/after school care and due to the demand for childcare services these providers are still able to fill their spaces.

This is not the case in lower income areas where many families are partially or fully subsidized. Single parents, students, those who work various shifts, don’t have reliable transportation etc will all have fewer childcare choices available. Even in middle class neighbourhoods some families ‘temporarily’ place their children in childcare homes with higher rates – just until they find something more affordable.

Funded childcare centres are considered ‘Not for Profit’ but all home childcare providers are considered self employed and therefore ‘for profit’. Many home providers feel that funded homes should also have the ‘not for profit’ status because we have no control over our childcare rates. Most of us have chosen to operate a funded home because we feel affordable childcare is an essential service.

I’ve heard it said that family childcare providers have options to increase their income but I don’t believe that should include limiting access to quality childcare to only those who can afford it. This post is long enough already so in my next post I’ll discuss the expenses related to home-based childcare and some of the things home providers can control.

A Matter of Money – Centre or Home

I think one of the greatest things about childcare is that no two programs/facilities are exactly the same – and that is perfect because no two children are the same either. Some children thrive in a centre environment while others need the smaller, more familiar setting that a family childcare home can offer. The same is true for Early Childhood Educators. It is the variety of childcare environments that gives ECE’s the opportunity to choose the one that is the best fit for them to work in.

In my last post I described family childcare as my ‘calling’ – there is no other job I would rather have regardless of the income and this includes centre based childcare. Just because I think family childcare is the best place for me does not mean I think it is the best form of childcare for every ECE.

My daughter was 12 years old when I first opened my childcare home. She was actively involved in all our activities and couldn’t wait to turn 18 and be able to sub for me. After graduating high school she went on to earn her ECE II diploma and went to work in a centre. She made many financial sacrifices to save enough money from her limited income to buy her own home. Most people assumed she was planning to switch to family childcare. However, when asked about it she was adamant – “NO! She would never, EVER work in family childcare.”

She is now an ECE III working full time in a centre specializing in infant care. I am an ECE II operating a licensed family childcare home We’ve shared many stories and had many conversations about the similarities and differences between our respective careers. Our annual incomes before taxes are almost identical – when mine is calculated at its maximum. There are numerous factors that cause family childcare income to fluctuate – some I will mention later in this post. Family childcare expenses will be covered in a separate post.

We also cannot compare our after tax income because there are so many variables such as number of dependents and total family income that affect the amount we pay for taxes. So, for the moment I’m just going to say that our incomes are both about the same at $32,000 annually before taxes.

So, let’s compare hours next. My childcare home is open Mon-Fri from 6:30 am until 5:30 pm so I spend 55 hours per week with the children without any breaks. Working in a centre I wouldn’t work that many hours so, at the same annual income if you were to count only the hours we spend with the children my hourly wage as a family childcare would be much lower than my daughter working in a centre.

However, working in a centre also requires traveling time and expenses to get to and from work. If you count the time from when my daughter leaves her house to go to work until she arrives back home after then her work day is equal to mine too. I consider the ‘no commute time/expense’ a perk of working in family childcare that is an acceptable trade-off for spending more time with the children.

I also spend about 14 additional hours per week cleaning, doing paperwork, planning activities, and meeting with parents etc when the children are not here. Technically these are all unpaid hours and some of these duties would not be required by an ECE in a centre. Some of them are required and the centre ECE has to get them done sometime during their regular workday. There are a lot of things I could probably do when the children are here but I choose to do after hours because it is easier. To a certain extent how much time I spend ‘working’ is my choice and breaking down family childcare income to an hourly wage is impossible.

I feel the additional hours of work a family childcare puts in is an acceptable trade-off for the amount of control we over our program and environment. I’ve toured many childcare centres where just walking through the rooms makes me shudder and I can’t imagine having to work there. There are centres that I think are fabulous and they have philosophies and programming that I believe in – but they also have other staff members. Many family childcare providers quite willingly label ourselves as ‘Does not work well with others’. It is not that we don’t get along with other people but rather that we have difficulty sharing responsibility. We would prefer to just do it all, our way, by ourselves – that’s why we chose family childcare.

However, there are some definite downsides for an ECE working in family childcare – fluctuating income has to top the list. Remember, my maximum annual income was about the same as that of an ECE working in a centre – but not all providers have eight filled spaces all the time so there are many factors that make my income drop below maximum. If you have difficulty setting and sticking to a budget or are relying solely on one income family childcare may not be a good career option.

Many family childcare providers cannot or will not fill their school-age spaces – there is little financial incentive to do this. The additional expenses, supplies and work required for school-age care are so high that many providers find it is not practical even if they live in an area where there is a demand for school-age care. Considering only the five preschool spaces a family childcare provider has – if all the children in care are over two years old then the provider’s income is more than $600 per month lower than maximum. That puts a family childcare provider’s income significantly lower than that of an ECE working in a centre.

Becoming a licensed family childcare provider is often touted as being a great way to work AND stay at home with your own children but I might really disagree with that view. If your family childcare income is your family’s main or only income it definitely does not make sense to choose FCC over working in a centre. Your own children use up childcare spaces lowering your income from both parent fees and operating grant – essentially costing you more than if you worked outside your home and paid to put your children in childcare. An ECE working in a centre would still receive their full salary and if that was their only income they would probably qualify for a subsidy significantly lowering their costs for childcare.

So yes, there are some big differences between working in family childcare vs. working in a childcare centre but it is all about choices. There are pros and cons to both – you just have to decide which trade-offs you are willing to make. My next post is going to deal more specifically with the financial side of family childcare so, stay tuned….