Personal Finance

Affordable child care may be as mythical as unicorns

Key Points
  • Family budgets are being increasingly pinched by rising child care costs, a survey says.
  • Cost-cutting measures include cutting back on cable, date night and even having fewer kids.
  • "We know that so much of what happens in the first five years lays the foundation for being successful in school, successful at work," says Katie Hamm of the Center for American progress. 
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Stanley Smith of Fort Myers, Florida, shells out $1,800 a month for an infant and a 3-year-old to attend a local day-care center.

Smith said his family can afford the cost without too great a struggle. However, he added, “it’s definitely money I would rather use for other things."

It’s not your imagination: If you’re a parent confronting a mountain of bills and struggling to cover them all with an increasingly stretched income, you’re far from alone.

Child-care costs jumped for the fifth straight year, according to a survey from The site surveyed more than 1,000 U.S. parents in May to see how their child-care spending affects their finances. Weekly rates for the various types of caretaker come from 2017 member data and centers listed on the site, as well as data from au pair organizations.

The top finding: Most families pay an uncomfortably high amount for child care.

What is "affordable"? Obviously a household with an annual income of $48,000 would define "affordable" differently than one pulling in $120,000 a year.

What does affordable mean?

Percentages are an efficient way to quantify the impact of child-care costs on a household budget. And, according to the U.S. Department of Health and Human Services, affordable child care would consume 10 percent or less of the family budget. finds that a substantial majority — 70 percent — of families in the U.S. don’t even come close to that level. Instead, they pay about twice that affordability threshold.

In order to manage costs, families responding to the survey say they’ve cut back on cable and reduced their number of date nights. One in 3 families also said child-care costs had played a part in family planning. They either put off having children or planned on fewer children than they would have liked.

You have to think of your long-term earning potential and your retirement assets. This just shows financial tradeoff.
Katie Hamm
Center for American Progress

The simple comparison many people make is take-home pay versus the cost of child care, according to Katie Hamm, vice president of early childhood policy at the Center for American Progress in Washington, D.C.

But this financial trade-off misses a big piece of the puzzle.

“You have to think of your long-term earning potential and your retirement assets," Hamm said.

If you want to claim this tax credit, you have to come clean to the IRS first

Other benefits and personal preferences may be harder to calculate. But for many people the calculation is financial. “They feel they can’t afford to work, and they can’t afford to quit,” Hamm said.

Here’s what you could be giving up, if one parent gives up a salary just in case you’re thinking that it would be cheaper to stay home. A calculator from the Center for American Progress shows how much parents lose when they leave a job to save on child-care costs. To calculate your losses under different scenarios, you can change your expected age of retirement, salary and years you plan to be out of the workforce, among other factors.

Follow the money

People don’t always understand how the money is really spent after they pay their child-care bill, Hamm said.

Say a teacher cares for three infants at $15,000 per baby. Out of that $45,000 total, the day-care center must pay wages, utilities, rent, supplies and cribs, insurance and other salaries for its workers and administrators.

An interactive tool from the Center for American Progress shows you where the money goes.

Plug in your state, your child’s age and then tinker with options such as “fewer children per teacher, “make the classroom bigger” and “increase salaries,” among others, to see how they impact your monthly costs.

‘A widening school readiness gap’

Child care isn’t just necessary so families can earn a living. “We now know that so much of what happens in the first five years lays the foundation for being successful in school, successful at work,” Hamm said.

She is concerned about a widening school readiness gap, as the ability to access high-quality child care is limited by a parent’s ability to pay. People depend on a patchwork of solutions, from a network of family and friends to part-time employment.

“Child care is definitely unaffordable,” Hamm said, and the most common arrangement — day-care centers — are out of reach for low-income families. “Only a quarter of young kids are in child care centers.”

Hamm said the U.S. is lagging other countries with longer paid family leave and access to early childhood education. Some countries that haven't previously done so, such as China, are now addressing these issues, she said. “This will contribute over the long term to our global competitiveness in a negative way.

“High-quality early education is something kids need,” Hamm said. “It’s becoming a contributor to inequality.” At the same time other countries have extended paid family leave, with early childhood education, so families get support through those critical first five years.

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