As the country's economic inflation surges, the family's expenses rise too, especially child care related expenses - day care centers, food, health care and even their source of entertainment.
Parents are looking forward to a little bit of financial relief with the upcoming tax season as the deductions and credits happen. Not to rain on one's parade but unfortunately, due to the recent reductions to child tax credits, parents may not get as much as expected.
It is quite possible that instead of getting a refund from the government, parents would be paying the IRS instead.
Thus, parents need to do some reevaluation of recurring expenses that are child related so that family funds can survive 2023.
Strategies to cut cost
For parents to still have that financial relief for this new year, finance professionals are encouraging them to reduce costs on their children's day and health care services, groceries and entertainment. And, along with this suggestion are a few strategies on how they can effectively do just that, CBS News reported.
1. Child Care
Alton Bell II, principal accountant and founder at Bell Tax Accountants & Advisors in Chicago stated that parents should prepare for a "tax refund reduction shock" this year as the credit around child care gas "significantly changed."
As the world goes back to normal and putting the COVID-19 behind, the increased tax credits and deductions parents benefitted from during the pandemic are also slowly going back to their original limits. As mentioned above, parents are going to get less for 2023.
Thus, it can be a good idea if parents can do away with child aftercare. A monthly savings of more or less $200 can be set aside if children can stay at home instead of day care centers. If parents work remotely, they might want to consider being with the kids at home for a few extra hours.
2. Healthcare
Parents can consider having a health savings account (HSA).
HSA is a type of savings account that allows individuals to set aside funds on a pre-tax basis to eventually pay for qualified medical and health care expenses.
Premiums can be quite apparent on the family's monthly expenses, plus copayments every single time the children need to visit the doctor, out-of-pocket costs skyrocket. Thus, if parents and children are relatively up on their health, HSA is a better investment.
With HSA, according to Health Care, parents can use untaxed dollars to pay for copayments, deductibles, coinsurance, and some other health care expenses, which can result in a lower health care cost overall.
But parents need to know that they must have high-deductible health insurance plans before they can contribute to an HSA. These high-deductible health plans have lower premiums, which can result in parents saving money.
3. Groceries
Reduce the grocery bills, especially that inflation are giving families higher food costs.
Personal finance expert and founder of Florida's Finances Demystified Dominique Broadway encouraged parents to go back to basics and start writing down again the family's, especially the children's, shopping list ahead of time. She describes this approach as one effective cost-saving strategy as planning the shopping list ahead of time can avoid buying items the family does not actually need.
Moreover, she also suggested switching from going to the actual grocery store to utilizing the grocery store's delivery service as this will help in knowing the exact amount to spend. She even recommended trying different delivery service providers to see the price difference. She testified to a $40 to $50 savings, which according to her is big amount when added up for the year.
4. Entertainment
Stop buying toys and take advantage of free children activities in the community.
Broadway emphasized how sometimes parents tend to forget that they value experiences more than material things.
"I've purchased a $3 activity kit from Target and gotten hours of fun and play with my children out of something like that versus just buying them a bunch of toys. I think that alone is a great way to cut costs and build a better relationship with your children and make more memories with them, as well," she shared.
When all strategies have been tried and the financial relief comes, parents can take the extra funds and invest them in a custodial account for their children's savings or child-related future expenses.
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