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I have lived in Urbana for the past 10 years; I have 9 and 10 year old children. I moved here from Boston and was dubious about what I would find to do with kids - there is plenty to do and the cost of living is fantastic. There are many, many parks and because of the relatively mild climate, you can be outside for longer periods. Both Champaign and Urbana have recently renovated their libraries and they are quite nice; both offer many programs for young kids.
There are several good preschools in the area - Child Development Lab, Campus Cooperative Preschool, Montessori (2 or 3 in the area), Cooperative Preschool, Next Generation.
Urbana has "neighborhood schools" where the children feed into the schools based on geographics. We have had experience with both Wiley and Leal. Leal is located in the West Urbana neighborhood and borders UIUC. There are perhaps some schools in Urbana that you may want to avoid but in general, we have had a good experience.
The Champaign schools are "school of choice" and children are drawn from all over the district rather than the neighborhood. There are probably 3 - 4 elementary schools that are highly sought after and more children want to attend than there are spaces for. Although proximity to the school is a factor in whether your child is given a spot, I know families who can see a school from their front door but their child is placed somewhere else. The process is confusing but the Champaign Schools Family Center can be helpful to you.
I know people who children at two private elementary schools - Next Generation and Countryside. In general, I believe they are happy with the education provided at both.
Hope that's helpful.
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