Having a Baby in 2023? Here's One Workplace Benefit It Pays to Sign Up For

It could save you a lot of money.

Having a baby can be an incredible experience. But you can also bank on it being a costly one. Bringing a child into the world means facing a host of expenses, from diapers to healthcare to childcare costs. And the latter can really eat into your paycheck.

In 2022, a Care.com survey revealed that 72% of parents are spending 10% or more of their income on childcare costs, while 51% are spending more than 20% on childcare. Ouch.

If you're having a baby, there's one workplace benefit that could help ease the burden of childcare. And it's a perk worth signing up for.

Look at a dependent care FSA

Many people are familiar with the flexible spending account (FSA) in the context of healthcare spending. But there's another type of FSA employers offer, and it's a dependent care FSA. 

A dependent care FSA lets you set aside pre-tax dollars to pay for qualified childcare costs. These include full-time daycare facilities, after-school care programs, and summer camps. 

As is the case with healthcare FSAs, dependent care FSAs are subject to a maximum contribution limit. Right now, it's $5,000. 

Now, if you'll be paying for full-time care, you may find that your childcare bills amount to way more than that. But even so, it pays to enjoy some amount of tax savings on your childcare expenses. 

You should also know that with a dependent care FSA, you have to use up all of your funds within your plan year or otherwise risk forfeiting that money. So before you commit to funding a dependent care FSA, make sure your childcare plans are pretty solid. If you'll only be returning to work on a part-time basis and aren't sure how much care you'll end up needing and having to pay for, you may want to err on the side of underfunding your dependent care FSA. 

How much savings can you enjoy?

Let's say you decide to put $5,000 into your dependent care FSA. Your actual savings will be a factor of your personal tax rate. But if that tax rate is 22%, for example, then a $5,000 contribution to that FSA will result in $1,100 of actual savings for you. That's not a bad deal. 

You may want to boost your healthcare FSA contributions, too

Having a baby could mean spending more on healthcare in 2023. And so in addition to putting money into a dependent care FSA, you may also want to increase your healthcare FSA contribution. 

Of course, there's a host of budget changes you'll probably need to make once a baby comes into the mix. And you shouldn't be shocked to see your credit card bills start to rise. But if you're savvy about eking out savings, you can make that financial adjustment a lot easier on yourself. And if you know you'll be paying for childcare to keep your job, then it definitely pays to sign up for a dependent care FSA through your employer.