Nicole and Matthew Griffiths, a couple from Brighton with a combined income of £205,000 a year, faced childcare costs of nearly £40,000 annually for two children, leading them to fear they could not afford a second child. The couple, both in senior roles at tech start-ups, were caught in what they describe as the '£100,000 childcare trap', losing access to tax-free childcare and reduced free hours due to one parent earning over £100,000.
The £100,000 childcare trap and its impact
Under current rules, parents lose entitlement to tax-free childcare worth £2,000 a year per child as soon as one parent earns over £100,000. Additionally, they only qualify for 15 hours of free childcare a week for a child over three, rather than the full 30 hours for working parents under that threshold with a child over nine months.
The couple were already paying £1,600 a month for their eldest daughter's nursery when they discovered they were expecting a second child. Their mortgage repayments also jumped from £2,100 to £3,300 a month on their three-bedroom home in 2022. This left them facing nearly £3,000 in extra monthly outgoings, the equivalent of needing to earn £70,000 before tax to cover the costs.
Struggling to out-earn the problem
Mat, who was earning £125,000 as chief product officer at an insurance tech firm, said: "It's like private school fees. That was not what I planned for at all to send a one-year-old to childcare. We struggled to think of how we could afford a second child." Nicole earned £80,000 in senior management for tech service and operations and said the cost of childcare came as a shock when they first became parents. The couple also received dividends from two to three Airbnb properties.
Mat spent three months applying for two senior jobs, each involving nine stages of interviews, in a bid to increase his income. He said: "I did get two job offers and they were both really good jobs but because every pound you earn in that income tax bracket you basically take home half of, it's really hard to out earn the problem because you're paying so much in tax. I was basically out of action for like three months just trying to out earn it but I just couldn't."
Finding a solution through pension overpayments
When the couple discovered they were expecting their second daughter, the financial pressure threatened to become even worse. Mat said: "We obviously knew that we wanted to have another child, and so we were thrilled when we found out. Until the penny dropped that now it was going to be a few quid short of 40,000 pounds a year in childcare fees for two of them and I was like wow this is now getting completely out of control."
The couple spent months researching the complex rules around tax, pensions and childcare support. They spoke to friends, accountants, and government services to understand how they could reduce their adjusted net income. Nicole said: "The expertise didn't really exist under one roof and so it was really making it difficult for parents to actually see the problem." The process involved "months of wading through" general information and late nights reading about various benefit and tax systems, Mat said.
This allowed them to reclaim their childcare support worth £16,281 for both of their daughters, saving them £21,495. They originally did this through pension over-payments but quickly decided to change to the "entrepreneur route".
Launching a business to help others
After realising how many other families were facing the same struggle, the pair decided to turn their research into a business. They quit their jobs and launched Wealthy Parent Guide, creating a tool to help families earning six-figure salaries understand their options and save money on childcare. Mat said: "I just thought what do parents talk about when they've got very young children they talk about, one, how much they love their kids, and, two, how annihilated their finances are by child care costs. The average parent that comes to us saves £919 per month on their childcare costs." That is £11,028 per year.
The business helps parents model how changes to pension contributions and other financial arrangements could impact their childcare costs and take-home pay. Mat said: "A lot of parents tell us they're not going to have a second child because of the finances. They literally cannot afford it."
Nicole added: "As a society I would say we encourage women into senior leadership roles but the childcare system can financially incentivise them to step back. The higher earner in the household may trigger the loss of the childcare support but I think it's very often that if you've got one parent earning over £100,000 the lower earner may consider stepping back." She continued: "Statistically, that's probably more likely the mum. That is often where the mother's career does pay the price for the way that the system is set up."
Mat added: "If people in the prime of their careers are going, you know what, I don't want a bonus. I don't want a promotion because it just screws up my childcare costs. It's not worth it." He continued: "We need to get people incentivised to go out and work. But this whole system for the brightest and most ambitious minds in the prime of their careers is having the opposite effect."
