National Network for Child Care's Connections Newsletter
Kim Goodfellow, M.S.
South Dakota State University
Setting the fee you charge for the care you provide can be tricky, especially if you are just starting out in the business. There are three basic factors you need to consider when setting your fees.
1. How much can families afford to pay?

2. What the "going rate" is in your community?

3. How much do you need to charge to make a living?

How much families can afford to pay is the first piece of information you will need to investigate. Economists tell us that, in general, families can afford to budget approximately 10% of their income for child care expenses. That leaves them enough for other necessary expenses such as housing, food, and clothing. While you want to be sensitive to a family's budget, it is not your responsibility to help all parents afford child care.

It is your responsibility to set up a good child care program based on sound business practices. Keep in mind there are some government subsidy programs to help low-income families with child care costs. Unfortunately, they are often full with waiting lists. There are also two tax credits available to families that can help to lower parents' taxes or increase their refund. These are the Earned Income Credit and The Dependent Care Credit.

Next you need to investigate what the going rate' is in your community. This can be accomplished by calling your local child care resource and referral agency or child care licensing office. You can also contact other child care professionals in your area to see what they charge. You will want to know both the average rate charged, as well as the range of rates charged.

If you have more to offer families in terms of your education, your experience, and/or the kind of program you plan to offer, you may choose to set your fees at the high end of the scale. Some providers are tempted to undercut the "going rate." Sometimes this works, but many people believe that you get what you pay for, so it can work against you.

Now that you have determined what parents can afford to pay and what other child care professionals are being paid, you need to determine what you need to be paid. Before deciding this, there are some issues to consider.

First of all, you are a small business owner, and generally businesses try to make a profit. Child care professionals are kind and caring individuals who have subsidized the actual cost of child care for years. In their efforts to care for others, they have hurt themselves and their own families financially. Child care is a valuable service to families and to society. It should be paid for accordingly. The difficulty is that families often simply cannot afford the cost of quality care.

Second, you will incur many costs as you set up and run your child care business. You will want to consider the operational costs of toys, equipment, paper goods (paper towels, toilet paper, etc.), art supplies, food, house/center repairs, electricity, insurance, water, and rent. Once these expenses are subtracted, hopefully you will have some funds left for your salary and benefits.

[Lastly,] after you have studied these factors, you will be ready to set your rate. You can charge for your services on an hourly rate or on a flat weekly or monthly rate. Each type of payment has its advantages and disadvantages. The hourly rate is most beneficial when you have full-time children in your care a minimum of 40 hours per week. The hourly rate is less beneficial if you have several part-time children because you lose money the hours they are not in your care.

In the case of several part-time children you may want to charge a flat rate. By charging a flat rate, you will not lose as much money on part-timers as with the hourly rate because families will be paying for a slot, not hours of time. Charging a flat rate also alleviates disagreements about hours of care received. The amount you charge for full-time children will of course be higher than that of part-time children.


Besides the fees you set, you may also want to consider the following additional policies that affect your revenue.

- Will you charge different rates for chiildren of different ages? Some providers charge higher rates for infants and toddlers because they require more attention.

- Will you charge for days when a child iis absent due to illness or vacation? Some providers charge for these times because overhead expenses are the same whether the child is there or not.

- Will you charge for your holidays or vaacation? Some providers charge for these necessary benefits.

- Will you charge a fee when parents are late? Some providers do so to reduce the number of late parents..

A local resource and referral agency or child care licensing office can provide information about the kinds of policies used by family child care providers in your area. You can also ask providers in your community or neighborhood what policies they have in place.

Setting appropriate fees is one of the most important decisions you will make for your business. Remember to include in your decision what families are able to pay, what other providers in your area are charging, and what you need to charge to make a reasonable salary. Remember to consider the needs of children and families first when you decide what to charge to provide quality care and remain in business. When good child care providers have to leave the profession because they cannot earn enough to stay in business, everyone suffers.


~DOCUMENT USE/COPYRIGHT
National Network for Child Care - NNCC. Part of CYFERNET, the National Extension Service Children Youth and Family Educational Research Network. Permission is granted to reproduce these materials in whole or in part for educational purposes only (not for profit beyond the cost of reproduction) provided that the author and Network receive acknowledgment and this notice is included:

Reprinted with permission from the National Network for Child Care - NNCC. Goodfellow, K. (1994). Setting fees. In Todd, C.M. (Ed.), *Family child care connections*, 4(1), pp. 1-3. Urbana-Champaign, IL: University of Illinois Cooperative Extension Service.