When Should You Refund a Deposit?

A parent has paid you a two-week deposit upon enrolling her child in your family child care program. The contract states, “The deposit will cover the final two weeks of care for your child.”

A year later the parent leaves.

What would you do in these circumstances?

  • Your rates are higher now so the deposit doesn’t cover the current cost for two weeks of care. Do you charge the parent the difference?
  • Your rates are lower now. Do you refund the difference?
  • The hours you care for the child are now different than a year ago. Do you charge the parent or refund the difference?

A strict interpretation of the contract language cited above would mean you wouldn’t charge the parent more and you wouldn’t give a refund. The deposit was to cover the last two weeks of care, regardless of changed circumstances.

You are always free to give a refund if you want, to end your relationship with the parent on a positive note. I would hesitate to try to charge the parent any difference in your rates because this contract language doesn’t clearly allow for this.

To clarify things, I would suggest using this language in your contract, “The deposit will cover the final two weeks of care for your child, regardless of what my rates may be for the last two weeks of care.”

Your contract could read, “The deposit will be applied to the last two weeks of care. If your rate is higher then, you will be required to pay the difference.” I don’t recommend this because it will require you to keep the deposit in a bank escrow account (a separate account just for this money) and pay the parent any interest it earns over the time the money was in the account.

If you terminate care

If you are terminating a family and will not be providing care for the last two weeks, you have a responsibility to refund any deposit paid in advance for these two weeks. If a parent paid you a holding fee to enroll their child at a later date and you decide not to provide care, you should refund the holding fee.

How do you handle these situations?

Here’s a discussion about these issues on daycare.com.

Tom Copeland – www.tomcopelandblog.com

Image credit: https://www.akashicreading.com/contracts-are-fluid/

For more information, see my book Family Child Care Contracts & Policies.

Categories: Contracts & Policies

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