The high cost of child care for New Zealand families

We all want the very best care for our children but there's no doubt that regular support from quality early childhood education and care providers comes at a price.

In New Zealand, child care costs have doubled in recent years, and although the government offers 20 hours of free early childhood education for preschoolers, a means-tested Childcare Subsidy and an Out of School Care and Recreation (OSCAR) Subsidy to ease the financial burden, OECD data suggests that Kiwi couples are spending more on child care than any other parents around the world.
 
Here, we look at the price of early education and care here, and in other countries.

What factors affect child care costs in New Zealand?

Different families pay different amounts for child care, and factors like eligibility for subsidies, location, choice of care, hours of care, and family size will affect how much you pay.

Peter Reynolds, chief executive of the Early Childhood Council explains that most early childhood education (ECE) centres get about 70 per cent of their revenue from state funding, and the remaining 30 per cent from parents’ fees. 

In the past, he’s recognised that child care costs are a struggle for many parents, and has attributed increased fees to the fact that government subsidies have not kept pace with the growing number of children in care. ECE services have faced rising costs for resources and staffing, and many providers have used their discretion to raise fees and pass increases on to parents.

As a result, many families are finding that a big chunk of their wages goes towards the care of their children, and Mr Reynolds has encouraged parents to shop around because, ‘Not all child care services are priced at the same level.’ He says that some ECE services survive wholly on government funding, with no fees for parents, and, at the other end of the spectrum, others charge a significant fee on top of what the government gives them. 

For this reason, it's important to choose the type of care that makes the most financial sense for your family, educate yourself about the government subsidies on offer, shop around for lower child care fees if possible, and look for high quality ECE services to ensure that you're getting the best child care bang for your buck.

The NZ Government's 2020 Budget also contained some good news for early childhood education and care providers, and in turn, families. 

As of 1 January, 2021, early learning services have received a 1.6 per cent increase to their subsidy rates to help them meet cost and demand pressures, and services that employ fully qualified and registered teachers are getting a higher funding rate. 

A 100 per cent funding rate applies to eligible teacher-led ECE services, which is having a positive impact on services’ finances and educational offerings. 

How much are other countries paying for child care?

Although New Zealand is a small country, we pay sizeable child care fees compared with other nations in the Organisation for Economic Co-operation and Development (OECD). 

In fact, according to recent OECD child care data, Kiwi couples pay the highest percentage of their income towards child care of any parents in the developed world. 

The OECD data shows that Kiwi couples on an average wage, using full-time, centre-based care for two children aged two and three, spent 26 per cent of their household income on child care. 

This figure represents net child care costs for parents, after benefits have been applied to reduce fees.

That said, we’re not alone in paying a high price for early childhood services. In Switzerland, couples spent 24 per cent of their household income on child care, while parents in the UK and Slovak Republic spent 22 per cent. Our neighbours in Australia put 19 per cent of their income towards child care, and American couples on an average wage shelled out 17 per cent. 

By way of comparison, Norway, Sweden and Finland have high levels of government expenditure on child care and families pay less:

• In Norway, couples spent 6 per cent of their income on child care;
• In Sweden, couples paid 4 per cent of their income (there, the government invests heavily in child care with its Educare system, meaning that even the wealthiest families pay very little); and
• In Finland, couples paid 14 per cent of their combined income (with children not starting school until they're seven)

The good news is that child care is more affordable for single parents in New Zealand. 

Assuming that a sole parent earns 67% of the average wage, the OECD has found that single parents here spend 12 per cent of their household income on child care. 

The United States pays the most (with single parents forking out 35 per cent of their income), followed by those in Cyprus (on 33 per cent) and the Slovak Republic (on 24 per cent).

Single parents in Australia spent the same amount as Kiwis, with 12 per cent of household income going towards child care.

The upshot of all this is that many families here, and around the world, are feeling the pinch when it comes to fees.

Still, it's important to remember that there are priceless benefits associated with quality early childhood education and care.

The Department of Education says that early learning helps children to be confident and curious about the world, do better when they go to school or kura, and learn the life skills that will help them be happy, strong and successful in later life.

The CareforKids.co.nz library has lots of information about different child care options, and hopefully you can find a workable way to cover the costs of child care and reap its rewards as a family.