How Rising Child Care Costs Are Impacting Families
Parenting

How Rising Child Care Costs Are Impacting Families

by Martha Scully

While affording quality child care has been an issue for some families for years, the rising costs are making it a mainstream problem for parents across the country. While the overall inflation rate has been about 1.6 percent since the end of the recession in 2009, child care costs have increased by almost double that, rising 2.9 percent on average over the same time period. While this may seem like a small percentage change, combined with the substantial increase in housing and education costs, it’s adding up to big dollars that most families just don’t have.

What Does Child Care Cost Today?

While the federal government defines affordable child care as that not exceeding 10 percent of the median household income, the average child care costs in 41 states exceed this standard. In fact, infant daycare costs more than the average household rent payment in 17 states, and in 23, full-time child care for preschool-aged children costs more than private school tuition.

While the average national cost of child care for two children is about $18,046.50 according to Child Care Aware of America, this varies widely by geographic area. The southern United States is the cheapest, with an average of $15,200, and Mississippi has the lowest preschool center-based child care rates at $4,312 per child annually. Child care costs are significantly higher in the northeast, with an average of $22,099 for two children. That same preschool center-based care is an average of $12,355 per child annually in New York. Hiring a nanny can cost even more, coming in at an average of $2,167 to $3,033 a month.

Why is Child Care Cost Increasing?

Child care has always been a significant expense largely because of the costs the providers incurred. Each state has a specific child-to-provider ratio that must be maintained based on the children’s age group, and parents are often looking for highly qualified providers with degrees in early education. On average, 80 percent of a child care provider’s costs is payroll related. Providers also have significant expenses when it comes to renting and maintaining facilities as well as making sure that they have all the required insurance and comply with all the federal and state laws.

Another aspect contributing to the rising costs is just basic supply and demand. More families need two salaries to be able to cover all the expenses, and this means both parents work and thus more families need child care. The more people who are in need of something, the more providers can charge.

House Cleaning and Other Chores

Many nannies are involved in chores, laundry, cleaning, and polishing - beyond child care. The cost of this home cleaning has also grown over recent years. The average family today pays between $20 and $80 for house cleaning, according to Housekeeper.com This price varies based on city and by the specific skills you need - but without a doubt the overall expense associated with housekeeping is on the rise.

The Impact of Rising Child Care Cost

The increase in child care costs puts a serious strain on the budget. When so much of the family’s income is devoted to paying for child care, it means there’s not much left to cover basic living expenses, let alone extras like sports fees or back-to-school clothes. By the time a family pays for child care and housing, it can easily become a juggling routine trying to figure out which bills to pay each month. Financial strain can also lead to other immediate problems. Variable budget items, such as groceries, may have to be decreased, which can leave many children living with food insecurity or lacking in other areas. It can also be very hard to overcome this issue. At the federal minimum wage of $7.25 an hour, even a full-time job isn’t going to be enough to cover the average child care costs.

According to a Gallup poll, 37 percent of those aged 30 to 49 — an age range when most people are raising their children — report not having enough money to “live comfortably.” Financial insecurity almost always leads to elevated stress levels in the home. Money matters are one of the biggest sources of marital strife for couples, and couples who fight about money at least once a week on average face a 30 percent greater risk of divorce than those who don’t, according to a Utah State University study.

When the high cost of child care takes a large percentage of the family budget, it can also set the stage for long-term financial problems. These families have a much harder time keeping a healthy savings account and may find themselves facing overwhelming debt from paying for daily expenses with credit cards. However, this is just a short-term fix, and it’s not uncommon for the debt to create an even bigger problem, affecting your credit score and making it harder to qualify for low-interest rates or buy your own home.

Financial problems due to high child care expenses in the midlife years can also set the stage for a lower quality of life after the children are grown. If you haven’t been able to put money toward retirement over the years, it can mean that you have to work longer before you’re able to retire — if at all. You may also not have the money set aside to pay for things like health care expenses or end-of-life care.

The increase in childcare costs can make nanny sharing a really attractive option. Your child can still receive personalized care but can also have some social interaction too. And both families can save a lot of money! See this nanny share and payroll guide for more information.

Looking Forward

Child care has gotten prohibitively expensive for many families across the country, and it’s causing significant problems. Parents are already looking for lower cost alternatives, such as using grandparents and babysitters, and if the increasing cost trend continues, more families will have to find a way to bring in more money or cut expenses even further.



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About the Author
Martha Scully
Martha is the founder of CanadianNanny.ca. Martha has been featured as a Child Care Expert in hundreds of publications across Canada including The Globe and Mail, CBC, Today's Parent and The National Post, She lives in British Columbia with her husband and two daughters.