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Making Preschool Fit in the Budget

Sep 16, 2020 - Posted by: Rocky Mountain Credit Union


As residents of one of the few states that doesn’t have public preschool programs, Montana families can feel overwhelmed by the cost of childcare when the time comes for the kiddos to start their preschool journey. But it doesn’t have to be that way. With a few budgeting tricks and the help of some savings options, paying for preschool can be a lot simpler than you may think.


Look for Options in Nearby Areas 

If you can commute a short distance, you may be able to save big. Neighboring communities could have more options when it comes to preschools, as well as lower prices. If you can afford to drive a little way, it may be worth it in the tuition savings.  


Take Advantage of Childcare Subsidies 

Childcare subsidies can be a lifesaver when it comes to preschool costs. Tax credits like the earned income tax credit and the child and dependent care tax credit may be an option, depending on your situation. It’s worth looking into if it can help you save. 




Start Budgeting Early 

When your child starts nearing preschool age, it’s an excellent time to begin thinking about your budget, and how pre-k will fit in. Work out your monthly household budget, and then start thinking critically. How much is left over after your bills are paid, food is on the table, and you purchase the essentials? It’s best to know early if you’ll need to make any lifestyle changes to afford preschool costs.


Look into Public Programs 

Low-income families can investigate programs like Head Start and others that offer assistance for early-childhood education. Early Head Start may be an option when the kids are even younger, helping them get on the right learning track early. Though Montana does not offer state-run preschools, co-ops could be a great way to save some money and find community. 


Gift Tax Exemption

Suppose grandparents are in the picture and want to help out financially. In that case, they can take advantage of tax savings benefits by gifting now, rather than planning on leaving an inheritance for their grandchildren down the line. They can see their family appreciate the money in this life, instead of waiting to pass on before sharing their estate. Individuals can gift up to $15,000 annually without the amount going toward lifetime and gift tax limits, making a preschool contribution a special way to pass on money to loved ones.  




Use an ESA 

Most people think of a Coverdell Educational Savings Account (ESA) as a way to pay for college, but it can also be used to cover preschool costs. This account used to be known as an education IRA, and it works in a similar way to a standard IRA. The money you contribute to an ESA is tax-deferred until it’s used to help pay for education costs. 

There are some additional restrictions when using this account to pay for preschool, so be aware. According to the IRS, the tax-free contribution from a family member can’t exceed $2,000 annually. And if the amount in the account winds up being more than what’s needed to cover qualifying education expenses, the difference may be subject to tax. 

Start saving early, and this account can save you a lot of money on tax payments in the long run. Then you’ll have it to draw from when preschool — and college — time is here.


For more information on ESAs and other savings accounts with RMCU, click here


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