Whether you’re expecting your first child or are adding to your already-established family, determining the right type of child care is crucial. For many, this comes down to hiring a nanny or using a daycare service. There are pros and cons to each, and they both provide a similar service: caring for children. However, there are distinct differences between these two options.

What is a nanny?

A nanny is an individual who provides an extensive array of care-based services for a child or children. In addition to keeping them safe, she will prepare meals and perform housework related to their care. Nannies often live in the home, or they can have a set schedule of hours that they are onsite. They may be tasked with transporting children to and from school and recreational activities. There are no legal requirements or educational prerequisites to become one of these private childcare providers. However, as the non-profit Race Against Abuse of Children Everywhere explains, there are professional certifications nannies can obtain.

What is a daycare?

A daycare is a non-educational childcare facility. They are typically located in commercial areas, or they may be operated from a private residence. Childcare centers must be licensed, and many larger facilities are managed by directors with many years of education and experience in the industry. Licensing regulations vary by state, but they will typically address child-to-adult ratios, food handling, and equipment regulations. The National Database of Child Care Licensing Regulations, a tool provided by the Division of the Department of Health and Human Services (HHS), provides information on daycare center licensing requirements by state.

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Costs

Multiple factors determine the total cost of each. Nannies set their own prices, and can accept or deny proposed compensation. Daycare centers have a fixed rate, which is often dependent upon the age of the child. A public daycare facility that accepts government benefits may have a reduced-fee structure for low-income families that receive financial assistance.

For 2017, Care.com estimates that the average weekly rate for a nanny was $580. The International Nanny Association’s most recent Salary and Benefits Survey reveals that there are more factors that govern the actual cost of hiring a private nanny. These include paid vacation time, compensation for overtime hours, bonuses, and salary premiums based on certifications and education.

A licensed childcare center can cost as much, or more, than a nanny. In DC, for example, a daycare center may cost more than $41,000 per year for two children.

Services

As mentioned previously, a nanny has many responsibilities. Her job description may include everything from assisting with homework to administering medications to potty training. Nannies become a part of the child’s life and are often considered a member of the family. She may accompany the family on vacations and may be expected to be on-call at all hours. A good nanny will tend to a young child’s educational needs and may, in many cases, act as a surrogate parent. A nanny will most likely prepare two or three meals each day, and may do the family’s grocery shopping.

A daycare center is a structured environment. Children have set meal times and nap schedules, and are usually confined to a specific area with their same-age peers. People who work in a childcare facility are background checked, and typically required to hold CPR and First Aid certifications. Many high-end childcare centers also require a degree in early childhood education. Some daycare facilities provide one meal plus a snack, and children may not be allowed to bring their own food if the center is state-funded. Others require a healthy lunch and snack to be sent each day.

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Oversight

There is no legal body that provides oversight of nannies or babysitters. This is one negative for some parents who wish for their caregiver(s) to be required by law to provide certain services for their children. Researching the background of your nanny is your responsibility, as is giving her explicit instructions on how she is to care for and interact with your child.

Center- and home-based childcare providers are regulated. In addition to maintaining a record of licensed facilities, each state’s family services (or similar) department handles matters associated with daycare regulation. In Virginia, for example, the Virginia Department of Social Services requires that licensed child daycare programs are inspected twice each year, and must follow guidelines relating to health, safety, training, and orientation. Many states further choose to assign a rating to each registered care provider. The New York State Early Childhood Advisory Council’s QUALITYstarsNY is a voluntary program that gives parents an easy-to-understand glimpse into a particular provider’s reputation. Your state may or may not have these ratings in place.

It is important to note that laws apply to all programs that advertise as a childcare facility. These laws often do not extend to an individual that watches children in her home, provided she does not meet your state’s legal definition of a childcare provider.

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Taxes

When you pay an in-home caregiver, you are responsible for the Nanny Tax, which Investopedia describes as “a federal tax that must be paid by people who hire household help … and pay them more than a specified threshold amount during the year.” The Nanny Tax includes Medicare, Unemployment, and Social Security taxes. The tax structure also helps to ensure that the individual is legally employable.

Whether you choose to hire an individual or send your child to a daycare facility, depending on your income, you may be eligible for the Child and Dependent Care Credit and the Child Tax Credit. The former provides a credit not to exceed $6,000 per tax year, and is only applicable if you have dependents who are under the age of 13 (and certain physically- or mentally-incapacitated adults in your care). The IRS stipulates that this credit may only be taken if you pay for child care so that you can work or, if you are unemployed, look for work. If your child is enrolled in a facility, the administrators will provide a form stating the amount you paid that year.

The Child Tax Credit is a different credit available to all parents up to an income threshold of $240,000 or $440,000 for single or married parents, respectively. The Child Tax Credit applies to qualifying children who are 17 years of age or younger, are claimed on your income taxes as a dependent, and meet other credit eligibility requirements. A credit of up to $2,000 per child may be requested by families who meet all criteria.

Care.com offers additional information on the Nanny Tax.

Pros and cons

Daycare centers

Daycare centers are run much like any business, in that there are multiple workers available who can fill the gap if the primary care provider is out sick. Children often have access to learning stations, and may get to experience outings and recreational activities in a supervised environment along with their friends. Children who are exposed to high-quality early childhood care and education often have better language and social skills than their isolated peers. The Harvard Gazette recently analyzed nearly two dozen studies on the topic, and found that children who spend time in a daycare with a preschool setting do better in school. Further, they are less likely to repeat a grade than those who receive no early childhood education.

One of the biggest drawbacks of a childcare center is availability. The vast majority of these facilities are open during set hours, often 6 A.M. to 6 P.M. This makes it difficult for parents with unpredictable schedules, such as an emergency room physician or restaurant server, to ensure their children’s needs are covered 100 percent of the time. Many of the best daycare facilities also have a waiting list and a fee for inclusion. This leaves many families struggling to find interim care, and there is no guarantee of future availability. Exposure to germs is another concern. Children who are prone to illnesses, such as strep throat, may become sick more often while in daycare or, later on, in school.

Nanny care

In-home care also has long-lasting benefits for young children. Those who do not do well in a group environment or outside of their comfort zone may thrive under a nanny’s care. A nanny can be more flexible regarding the child’s schedule and can cater activities to their interests. Having a nanny eliminates the frustration of transporting your child to and from daycare, and also ensures there is always an adult available to provide nutritious meals, emotional support, and one-on-one attention. If agreed upon in advance, your nanny will also be available to care for your child when he or she becomes ill, reducing the burden on you.

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The decision to put your child in a daycare center to employ a nanny is one that requires careful thought and consideration of your family’s lifestyle, budget, and personal preferences. Take into account the benefits and drawbacks of each, and know that you can always change your mind if your first choice doesn’t work out.