Childcare costs are soaring – but you can soften the blow.....

Nursery and childminder fees are up £40 a month in some areas but – for now – there are still ways to get help with costs

Childcare costs are soaring, with parents paying an average of £15 more each month than they were a year ago, according to research released this week.

An estimated 1.5 million families currently pay for childcare, which includes everything from nurseries and childminders to after-school clubs, says the study from children's savings specialist Family Investments.

Parents of under-fives account for almost half of those, and they have been hit hardest, with their average monthly bill going up by almost £24 in the past year, it says.

Those with children aged between six and 10 have seen a less dramatic £4-a-month average rise, according to the report.

London has long been the most expensive area of the country for childcare, and parents in the capital have typically seen their monthly bills rise by around £40, says the company.

Earlier this year, a report from the national childcare charity Daycare Trust found there had been "significant" increases across all forms of childcare. It said that in England, the cost of a nursery place for a child aged two or over had increased by 4.8% in 12 months.

"The pressures on family finances are unlikely to ease as further big changes are planned to child-related benefits," says Kate Moore, the head of savings and investments at Family Investments.

"Some families on relatively modest incomes have already lost some or all of their child tax credits, and those households with a higher-rate taxpayer are also facing the prospect of losing child benefit payments next year," Moore adds.

Parents therefore need to make sure that they are aware of – and that they take up – all the help with childcare costs that they are entitled to.

Here is what they should know:

Free childcare places Every three- and four-year-old in England is eligible for a free, part-time early education place with a registered childcare provider, which can include playgroups, nursery schools and childminders. From the term following your child's third birthday, they are entitled to at least 15 hours a week. Some local authorities also provide places for disadvantaged two-year-olds. To find out what is available in your area, contact your local Family Information Service.

Child benefit This is currently paid to all parents, regardless of income or savings, for every child or young person until they turn 16 – although those with youngsters in certain types of full-time education or training can claim until their child is 20. Weekly payments are £20.30 for the eldest child and £13.40 for other children. If you have not yet claimed child benefit, request a claim pack from HM Revenue and Customs on 0845 302 1444.

Child tax credit Families with income of less than £40,000 a year are eligible for CTC, whether or not they are employed. The amount received is related to family income and how many children there are. If your family is in work, you will get CTC at the basic element of £545 a year, and if your income is low you may also receive child elements for each of your children up to a maximum of £2,555 a child.

Working tax credit Financial support is available for those on low incomes with this benefit. Extra help is available for working parents through a childcare element, to help with the cost of registered childcare.

 It offers up to 70% towards the costs of childcare up to a maximum of £175 a week for one child and £300 a week for two or more children. The actual amount you receive depends on your income and childcare costs. To find out about and claim tax credits, contact Revenue and Customs on 0845 300 3900.

Help from employers Many employers support their staff with their childcare needs by providing financial assistance or on-site childcare services, which are exempt from tax and national insurance contributions (NICs). These include vouchers to pay for registered childcare. For basic-rate taxpayers, the first £55 a week or £243 a month of vouchers is exempt from tax and national insurance, and each employed parent can claim the exemptions.

However, you need to choose either the childcare element of working tax credit or employer-supported childcare. Although you may be able to claim both at the same time, you can't generally benefit from both systems, as the amounts will be included in any calculations done, and will reduce the amount for which you are eligible.

In making your choice you need to consider whether you benefit more from tax credits or from employer-supported childcare such as vouchers. The Daycare Trust says you will generally be better off using employer-supported childcare if you are getting less than £545 a year in total from tax credits, and vice versa. Use the childcare "better off calculator" to help you decide.

Detailed information on help with childcare costs is available from the Daycare Trust and from Directgov.

The bank of Nan

As the school summer holidays approach, many families will turn to grandparents for vital support in looking after their children.

This help forms part of the huge contribution grandparents make to their families in unpaid help – valued at up to £5,000 a year in a new study.

"Whether it is babysitting, taking their grandchildren on trips out or DIY, these simple and often overlooked tasks equate to a contribution of up to £4,500 a year to the average family. A potential £500 is also given in direct financial assistance," says Post Office Financial Services, which ran the research.

As parents begin preparing their childcare plans for the summer, a third will turn to grandparents to help out for at least a couple of hours a week. Almost half of younger parents (those aged 18-34) will receive a day's help each week.

The "Nan Estate" study highlights the crucial help grandparents give, and shows their efforts can save parents an average of £86 a week.

It says grandparents "contribute" around £400 annually by doing household chores, and more than £600 with homework assistance. However, most grandparents would not see these things in monetary terms – they simply want to help out. Rupert Jones

http://www.guardian.co.uk/money/2011/jun/24/childcare-costs-soaring-soften-blow