The Cost Of This Family Necessity Has Cascading Economic Consequences

Every American deals with dozens of expenses, from rent and food, to clothing, medical care, and entertainment.

But for families with children, these expenses increase significantly – especially for working parents who have the added burden of paying for childcare.

While you probably can’t pick up and move to another state, there are some areas of the country where childcare costs – and the reasons for them – differ greatly.

For many families with two working parents, full-time childcare can be one of their largest expenses.

Currently, around 65 percent of children under the age of five are enrolled in some kind of full-time childcare, whether in a daycare center, with a nanny, or with a family member or friend.

Those costs can vary greatly as well, with daycare centers often costing the most.  

There is also a relationship between the education level of parents and their childcare expenses.  Parents with more education often have better-paying jobs – but this “plus” often comes with longer working hours.

Many parents with lower incomes often find that full-time daycare is cost-prohibitive, and they often turn to other means of childcare, such as a trusted personal caregiver.

For some, outside childcare is so expensive that it actually costs the family less if one parent stays at home.  And while having a parent at home benefits the child, it can cause serious financial hardship and strained relationships for lower-income families.

According to the U.S. Department of Health and Human Services, families should spend no more than seven percent of their income on childcare.

But there are very few families who meet that goal, and costs vary by state, as well.  

Childcare costs have risen on a national level in recent years, and according to a survey done by Care.com, this has caused many families to either increase their level of debt or stop saving money for emergencies or for the future.

Even in states where childcare is most affordable, like North Dakota, Utah, and Delaware, the childcare cost percentage is still far above the recommended seven percent, where costs run from ten to 12 percent of family income per year.

California, Oregon, and New York have the least affordable childcare rates, running between 17 and 19 percent of a family’s annual income.

And in the nation’s capital, Washington, D.C., childcare costs average a whopping 27 percent of a family’s income.

But what is really surprising is that the median household income in the states where childcare is most affordable is actually higher than that of states with the least affordable rates.

And the ratios could be even more shocking, according to another survey, this time from the Organization for Economic Cooperation and Development, which estimates that most Americans spend more than a quarter of their income on childcare each year.

And for single parents without someone to share the load, the number is a shocking 50-plus percent of their income.

While it’s not just an American problem – childcare is costly on a global scale – the U.S. has a unique system.

An Associate Professor at Arizona State University, Chris Herbst, describes the U.S. as a “mixed economy system.”  Most childcare is private and can cost more than in-state college tuition, according to ABC News.

Some childcare centers, however, can be non-profits or handled by local, state, or federal programs, such as the federal Head Start program for low-income families.

It is because of this system that childcare types and costs can vary so greatly based on where a family lives and their socio-economic level.  

Some state and local childcare is subsidized by government programs; others have a sliding scale based on family income.  Private childcare centers can charge wildly different rates based on services, meals, and other factors.

Herbst also notes that in the U.S., wealthier families can better afford high-quality childcare, whereas lower-income couples are “priced out” and have to find alternatives.

This is also part of the national discrepancy in cost/income level statistics.

The bottom line is that old vicious circle.  

Parents who must work outside the home must find quality childcare for their children.  The better the quality, the greater the percentage of their income it will cost.

It’s a factor in our family dynamics, as well as the nation’s economy. 

Low-income families who cannot afford childcare and have one parent at home have little disposable income, more debt, and are left with less retirement and greater healthcare costs – not to mention the skills lost in the workplace because childcare is so unaffordable. 

Childcare is a necessity – and one that we can’t compromise on when it comes to quality.

But overall, parents are struggling to make do with less by keeping one parent home or spending more of their hard-earned salary on skyrocketing costs.

What do you think of the outrageous cost of quality childcare in the U.S.?  Leave us your thoughts.

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