How to maximise money saved from free childcare
If you’re one of the millions of Australians with access to free childcare, these are the smart things you can do with the extra cash.
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Working Australians accessing free childcare are being urged to think carefully about what to do with any extra money they now have in their pockets.
Around one million families are expected to receive free child care during the coronavirus pandemic under the Morrison Government’s $1.6 billion initiative, saving them many hundreds of dollars a week.
Registered nurse Kelly Slade, 38, has two children in childcare – Mason, 5, and Ashton, 3 – and stands to save up to $300 a week by accessing free childcare.
She said she may even be able to increase her shifts from three per week to five.
Ms Slade hoped it would allow her and husband Chris, 40, who works as a labourer, to pay down some debt.
“It will help us pay our bills,” she said.
“We have always struggled a little bit and because of the childcare means testing I’ve never been able to put the kids in for more than three days a week because my earnings become less than what my outlay is.
“We are going to be a little bit ahead of the game and we are hoping to put the extra money on our home loan and pay off our credit card debt.”
Data from financial comparison website RateCity showed if a borrower with a $300,000 mortgage over 30 years used additional funds otherwise spent on childcare they could make a significant difference to their loan.
If they paid an extra $200 per week for six months they would save $7005 in interest charges over the remaining 25 years of their loan and cut eight months off their loan term.
On a credit card, if they paid an extra $200 per week instead of the minimum repayments on a debt of $5000 with an interest rate of 17 per cent, they would wipe the balance within the six months and have $300 to spare.
RateCity spokeswoman Sally Tindall said the removal of childcare costs could help a lot of families.
“Some will use this money to pay the bills and keep up with the mortgage repayments,” she said.
“For some families, the extra money could even save them from having to take out a mortgage repayment pause.”
Financial adviser Scott Haywood said for those lucky enough to be working and able to maximise free childcare they should focus on culling any debt.
“The money should go into paying down debt including your home loan, credit card or personal loan,” he said.
“The focus should be on paying down the debt with the higher interest rate first and because people aren’t doing activities such as sports, that money may be able to sit in savings and not be spent on anything else other than groceries and essentials.”
FREE CHILDCARE
• Available to parents who currently send their children to childcare.
• Means testing no longer applies.
• Parents can enrol their children into child care if positions are available.
• The free arrangements will be in place for at least months.
• Discuss with your childcare the arrangements you would like in place.
• If you are working from home you may also be eligible.
Originally published as How to maximise money saved from free childcare