Money and Education: Affording Preschool

If you are considering primarily private preschools for your child, you will need to spend some time determining just how much you can afford to pay. Is the preschool that's twice the price worth it? In some cases yes and others no (we repeat the surprising fact: research indicates no quality difference even between the financial extremes of subsidized and full-fare preschools, on average). Your job for now is to determine how much money you can contribute towards your child's preschool expenses. This exercise will help you enter the process knowing exactly what you can afford and what funds you can make available for outside-of-school activities. A limited number of private preschools offer scholarships. Many have students whose parents work extra to afford private preschool, so don't assume you will be alone if you stretch to afford one. Many of you are already spending money on your children's educational activities and child care. Funds you spend now on the following items can be rolled into one lump and reallocated for your child's preschool years:

• Current child care during preschool hours
• Child care immediately before and after preschool hours
• Preschool tuition, fees, donations and gifts (if you are considering a switch)
• School supplies for home
• Educational toys for home
• Extracurricular activities
• Educational outings and travel
• Clothing for your child (if needs might change in preschool)
• Breakfast and lunch for your child (if either might be included in preschools you are considering)

The simple steps to determine how much you can afford are these (you may extend this to cover multiple children and later school years, if you like):

1. Tally the amount you are spending now on your child's education-related expenses. This is your "Current" spending.
2. Determine how much "extra" income, above your current yearly income, you will earn when your child starts preschool (if any), not including typical annual pay increases. Subtract estimated income taxes. (For example: $10,000 of "extra" income is worth $6,500 after taxes of 35% are subtracted.) Add this amount to #1.
3. Determine any "extra" expenses, above your current annual budget, that you are likely to have each year between now and the end of preschool. These might include a new roof, house painting, new children or anything else for which you are not already saving out of current annual income. Subtract this amount from what you had after #2.
4. Determine what expenses you are willing to cut from your regular spending. Do not limit your thinking to education and child-related expenses only. Consider all of your spending. If packing your lunch for work four days each week would save $1,000 each year, is that worth it? Can you cut back from paying for weekly to bi-weekly house cleaning? And so on. Only you can decide what lifestyle changes you are willing to make. Add this amount to what you had after #3. The total is your "Target" spending, though many of you will choose to spend far less in the end.
5. To get your "Maximum," add in any alternative sources of money, depending on which are both available and amenable to you. Examples include an extra job, employment at your child's preschool (often for a tuition reduction), selling assets you own, scholarships, home equity debt (but add interest if you take this route), and grandparents

Sometimes the question about money is "when?" rather than "how much?" You might know that you'll be earning much more later from a promotion or new job than now. In these cases, you will need to decide whether it is feasible and desirable to pursue a short-term source of money in the early years, remembering that you will pay both for preschool and interest if you take on debt.

Money and The Preschool Search