But let's get back to the cost of living. Especially if you are planning to start a family, you’d better have some assets, because taking care of children will certainly cost a fortune. For a better comparison I start with the situation in my birth country.
In the Federal Republic of Germany, childcare is a matter for the federal states and vary a bit. I will use the regulations in Hamburg; my German circle of friends is rooted there so I can draw on practical experience in addition to bare figures.
In Hamburg, children from the age of 12 months are entitled to a spot in a nursery (Kita). The first 30 hours of care in a week are free (i.e. financed by tax money). The parental contribution for additional hours depends on whether both parents work or not, and how much they earn. If they both work full time and need a total of 50 hours of care a week, the fees vary 16 and 204€ a month (as of the beginning of 2022).
The maximum amount has to be paid, if the joint monthly net income of the parents is 2,863€ or greater. If several children of a family are visiting a Kita, the fee for the second child is reduced to one-third and from the third child onwards only the minimum rate has to be paid.
(FYI, the largest possible fee of 204€ corresponds to the child benefit every family is entitled to per month, for the first child. As opposed to Britain, the benefit for additional children goes up, not down. The benefit also goes up and not down after a certain threshold of income is reached. As a British friend put it: Germany pays children a wage. One that is high enough to pay for childcare.)
From my Hamburg friends, no one paid more for childcare than the corresponding maximum rates. In other cities, friends had to pay between 700 and 900€ a month for private childcare. However, one can deduct childcare costs from taxes and thus get some of the expenses back. Two thirds of the costs can be claimed, up to a maximum of 4,000€ per year.
When it comes to subsidising nursery places, the British system is exceptionally more complicated than the German one. For example, the parental contribution depends not only on public funding and the parents' income and employment, but the age of the children, too.
Any public funding is provided by the local authorities. The following contributions are for full day care in Islington at 50 hours a week, as of the beginning of 2022. The cheapest contribution applies up to an annual income of £24,999 (gross) and the highest applies from a combined annual income of £120,000.
Contributions for children aged 0-2 range from £203 to £433. Per week! In a month, that's around £880 to £1,880, and in a year £10,180 and £21,680 [1]. And yes, these are the fees of the state-funded institutions.
You can't deduct nursery costs from tax. However, there is government support through the tax free childcare scheme. For every £8 paid in childcare costs, the state adds £2, up to a maximum of £2,000 a year, unless one parent(!) earns more than £100,000 a year.
For 2 to 3 and 3 to 4 year olds, the fees are slightly reduced and parents are entitled to 15 or 30 free hours of childcare per week, depending on whether one or both parents work full time. However, the free hours are only available for 38 or 39 weeks of the year. And again, if one parent earns more than £100,000 a year, support is not available. Taking all the benefits into account, contributions for 3 to 4 year olds range from £3,900 to £7,700 a year.
If more than one child attends a nursery, there are discounts, albeit more modest than in Germany. The second child pays 75 per cent of the full fees, the third 65 per cent, and the fourth 55 per cent.
As explained, these are the fees and conditions of publicly funded institutions. At a private Montessori nursery in our neighbourhood, children under the age of two were charged £2,350 per month. In Hamburg, the same provider asks for: a maximum of 204€.
When I checked how much we would have to pay for our children, my heart skipped a beat. The cost depended on many factors, but with an annual wage of £35,000 (me) and the typical salary of a general practitioner (my wife), the maximum rate would definitely apply. With two children aged one and three, a constellation that does not seem unlikely to me as a German, the annual contribution came to just under £22,000, taking advantage of all possible state benefits.
In Hamburg, we would pay 3,264€. But we would also be entitled to at least 4,016€ in child benefit. In short, we would have money left over for further expenses.
Like property prices, the costs of nurseries in England depend on the region. The median contributions for 3-4-year-olds in Islington are almost 43 per cent above the English average making them one of the highest in the country. However, the rates of the public system in Germany are not matched anywhere in England, not even close.
Or are they? After my research, I was sceptical. No matter what rates and benefits I found, childcare costs were barely covered by the corresponding incomes, especially when I included the high expenses for property and rent. Had I overlooked something? I asked our friends what contributions they had to pay and how they financed them.
Significantly, at the time of my survey, our London friends did not have children; those with children lived outside. Their childcare costs ranged from £800 to £1,200 per child and month. There were no major upward fluctuations because our friends were creative in saving money. Where possible, they reduced visiting hours, for example by involving grandparents in the care. This was often done in the middle of the day to save the cost of lunch. Yes, lunch is often charged extra, or the hourly rates are higher during this time.
Are there any other ways to reduce childcare costs? If you are lucky, your employer runs a nursery or cooperates with one. Or you can entrust your little ones to a childminder and save 10-20 per cent compared to nursery fees (if you can find one). A nanny would be much more expensive, unless you are lucky/unfortunate enough to have a multiple birth.
That leaves two options: One parent does not work until the child starts school. Or a family reduces costs by having fewer children with more time apart.
The latter is especially true for our English circle of friends. When I checked, they were all about 33 years old and had on average 0.15 children. When my German friends were that age, they already had 0.9 children on average. Four years later that number increased to 1.6 children. Even though many of my German friends are physicists like me, which means that the proportion of eternal bachelors is particularly high. (Therefore they don’t have any children at all.)
Basically, our German friends have had one child after the other in recent years. Some English friends have a similarly strong desire to for children, but their hands are tied. Before child number two can even be considered, child number one must go to school and new savings for the nursery must be built up.
Or they wait because they want to buy a property in the next few years. Banks see young children as a financial burden, for obvious reasons, and offer less competitive mortgage conditions.
In Germany, children are often the reason why families think about buying a house in the first place; in the UK, children are a major obstacle for a property purchase.
But having children should not be postponed for too long. Like property prices, the development of nursery costs knows only one direction, and that is steeply upwards. In the last 15 years these costs have risen by almost 50 per cent.
Note: If you would like to be informed about new blogposts by e-mail, please register at the top right of the page.
[1] This includes 2 weeks in which the nurseries are closed and in which no fees are paid.
Comentários