Alisha Harrison, a family child care provider, had a few minutes to review her records before the children started to arrive on Monday morning.
She glanced at her contract. “Let’s see,” she thought to herself as she checked off each item, “two weeks paid vacation, 5 paid holidays, two weeks of paid sick time off, annual rate increase allowance… Yes, it looks all in order.”
Next she looked at her financial files: “Liability insurance, car insurance, disability income insurance, life insurance, health insurance, dental insurance, long term care insurance”
“Since my last child left home for college this year I should talk to my agent to see if that will affect any of my insurance policies.”
“I should also make an appointment to see my financial planner next week to go over my retirement investments. I’ll ask her if I’m eligible for the Saver’s Tax Credit or whether I should contribute to a Roth IRA or Traditional IRA this year.
Does Alisha Smith really exist or is this just a dream?
If it is a dream for you, what can you do to make it your own reality?
The family child care business has come a long way in the last 30 years. Back then, most providers charged by the hour, not by the week. If the parent didn’t show up for one day, they didn’t have to pay. Provider’s fees were basically the same for all ages of children.
There were few written contracts, no advance payment, no paid holidays or vacations, and rarely did providers ever raise their rates. Thirty years ago most family child care providers did not look at their work as a career.
Today, a lot has changed.
More and more providers look upon their work as a business as well as a vocation. We see more and more signs of professionalism: accreditation, written contracts, a few benefits, weekly payments, local family child care associations, QRIS programs, and so on.
These changes have come faster in some areas than others. Although many more providers now see that they must take care of business as well as taking care of children, the number of Deborah Smiths is very, very small.
If you are a provider who wants more benefits and financial stability for what you do, then you must make it happen for yourself.
Will we ever have classes for parents on how to pay their family child care provider on time, or how to give their providers a raise? No.
However, not every provider wants the same financial rewards for their work. Money isn’t everything, and caring for children is a valuable service that some providers do strictly because they love it. We should always recognize and appreciate that people are motivated for different reasons.
For those providers who are looking for help in improving their financial position, here is a guide to financial security:
1) Determine where you are financially. Many providers are afraid of money. We don’t like to look closely at our money because we are afraid to learn that our finances may be in worse shape than we think. But the first step in taking control of our money is to know where it goes.
Start tracking all the money you spend in a typical month. Divide your expenses into two categories: fixed and flexible. If you have no choice about spending the money, it’s fixed expense. Everything else is a flexible expense. Take a look at your flexible expenses and decide what you can cut back and put this amount in a savings or retirement account.
2) Set goals and priorities. Decide what are the most important short and long-term goals in your life. Do you want to retire at age 65? Do you want to save money for your children’s college education? Do you want to pay off your credit card bills? For each goal set a timeline (short, medium and long term). Decide which goals you can achieve by setting a specific target for each year. You’ll never reach your goal if you don’t decide ahead of time what it is.
3) Invest in yourself. Your greatest asset is your own earning power. Keep it strong through training, professional development and personal growth. Pay attention to your health and emotional well-being. You should be enjoying your work. If not, find something else to do that makes you happy. Start educating yourself about money management and retirement planning.
4) Protect yourself, your family and your business against major losses. If you are age 40 there is a 43% chance that you will suffer a long-term disability that will prevent you from caring for children for 90 days or more before you reach age 65. Everyone should purchase disability income insurance to protect against a significant loss of earning power.
Insurance ensures that we can survive a major loss. Other types of necessary insurance are: liability, life, car, health, dental, and long term care. When an emergency comes, you won’t regret having too much insurance. For the names of insurance companies, see my insurance directory.
5) Pay yourself first. Go back to your list of fixed and flexible expenses under the first step. Once you have set a financial goal, set aside the money you want to save by treating it as a fixed expense. If you run out of money before the end of the month, cut from your flexible expenses.
6) Borrow sparingly. Your goal should be to pay cash for everything except your house, a home improvement and a college education. If you can’t pay cash for something, it probably means that you can’t afford to buy it today. Start a saving plan for major purchases. Spend less each year than you make. Pay off all credit card debt. It is hard to follow through on a retirement plan if you are making high interest payments each month.
7) Invest for the long run. There is no get rich quick scheme that works. Put aside regular, consistent savings to meet your long-term goals. Don’t wait to invest for your retirement. Start today by taking small steps. The act of saving begets the habit of saving. Teach your children to save.
Achieving financial security is not easy. But we can take responsibility for our own financial future. I believe that 30 years from today we will see a many more family child care providers like Alisha Smith.
Tom Copeland – www.tomcopelandblog.com
Image credit: wisewomenmontreal.com
For more information, see my book Family Child Care Money Management and Retirement Guide.