This plan is fairly simple, and makes a ton of sense. Several families across the United State are in situations where both parents work throughout the day. The cost of daycare has not only exploded since 1986 (The last time the fsa limit was touched). With the current decline in birth rates, rampant inflation, and other issues it’s not a mystery that the cost daycare and other essentials make it exciting and scary when you get the news of your little one.
The proposal is fairly simple, instead of offering only a daycare FSA we should be offering a savings account to assist with this burden. The Savings account would work much like the FSA where contributions are not taxed but do not expire. With the cost of Daycare being at least $1,000 a month roughly, contributions should be benchmarked at 15,000 per child per year, benchmarked each year to be adjusted for inflation.
This would assist families as they go through family planning and allow them to confidently save for their daycare expenses.
If a family was planning to try for a child in 15 months, and saved $250 per paycheck during that time this time up until the child was born, they would have roughly $14,250 in Daycare expenses in the bank. Over that time saving them (we’ll assume 14% tax rate) almost $2,000 in taxes over that time.