Let’s just say it’s a good thing kids are cute.
This will probably come as no surprise, but our precious little bundles of joy require a not-so-little bundle of cash to get by. If you’re still tallying the monthly expense just to keep an infant in diapers, you might want to sit down for this next fact: Average annual childcare costs have surpassed in-state college tuition in 33 states and the District of Columbia. Burp cloth, anyone?
The Economic Policy Institute, a nonprofit and nonpartisan think tank, looked at costs of childcare across the country . The EPI created interactive fact sheets to compare numbers against college costs, median incomes, average rents, and other financial data. Be forewarned, the findings may cause colic in grown adults.
The District of Columbia has the nation’s most expensive infant care with an average annual cost of $22,631 ($1,886 per month). The average childcare cost for a 4-year-old is $17,842 ($1,487 per month) in D.C. The infant care is $15,376 more than the average in-state tuition at a four-year public university.
It’s worth pointing out the exorbitant expense isn’t confined to just major metropolitan areas or geographic locations where the cost of living is typically high.
Sampling of costs across the nation
Average annual infant care: $10,957
Average annual childcare for a 4-year-old: $7,652
Average in-state tuition for 4-year public college: $6,141
Average annual infant care: $11,817
Average annual childcare for a 4-year-old: $8,230
Average in-state tuition for 4-year public college: $8,903
Average annual infant care: $11,201
Average annual childcare for a 4-year-old: $7,951
Average in-state tuition for 4-year public college: $7,387
Average annual infant care: $17,062
Average annual childcare for a 4-year-old: $12,781
Average in-state tuition for 4-year public college: $10,702
Average annual infant care: $8,694
Average annual childcare for a 4-year-old: $7,668
Average in-state tuition for 4-year public college: $4,423
Why so much?
It’s not easy to pinpoint why childcare costs have skyrocketed in the U.S. An article from Bloomberg looked at the issue and examined a few possible theories ranging from increased regulations and decreased government funding, to higher overall operating costs at daycare centers. Safe to say, the simple supply-and-demand economic principle doesn’t answer the question. A shift in what people are willing to pay might be one driver.
“Parents don't treat daycare as a commodity. People will pay for quality, if they can,” the Bloomberg story theorized. It also pointed out the economic recovery favored the high-skilled and high-income labor pool. And those people are willing to spend more for care.
Managing (or surviving) the expense of daycare
For families with two working parents or single-parent households, some form of childcare is often a necessity. If you can’t avoid the significant monthly costs associated with care, you might be able to find some savings to at least soften the blow to your family’s bottom line.
Currently, the Child and Dependent Care Credit allows parents to claim up to $3,000 for one child and up to $6,000 for two or more children on tax returns. Talk with a licensed tax professional to make sure you’re able to get the most from this credit.
If you haven’t already done this, find out if your employer offers access to a Dependent Care Flexible Spending Account (FSA). This lets you save pre-tax dollars to be spent on eligible dependent care services. The IRS currently allows up to $5,000 a year in payroll deductions for individuals or married couples filing jointly.
Find childcare to fit your life and budget
As a parent, you want the best care for your kids. You also want to have enough money left in the bank to keep them fed and properly clothed. For these reasons, it might be worth doing some research to determine the type of childcare that meets your needs and your budget. Care.com offers some thoughts on ways to manage costs . A few ideas:
If hiring a dedicated nanny seems too expensive, consider sharing one with another family. A qualified nanny may be able to watch two or more children without necessarily doubling the cost.
An alternative to a daycare center, a family childcare center is hosted in a caregiver’s home. You may forego some of the amenities found in a formal daycare center, but the cost savings could be worth it. As Care.com points out: “Just make sure whatever facility you choose is licensed by the state, so you know you're getting the best care possible.”
Host an au pair
Provided you have the space and you’re willing to host live-in help, an au pair can provide your children with the care they need and the opportunity to learn about other cultures. Au pairs are young people from other countries who work in childcare. As a host family, you provide room, board, and a stipend. The au pair cares for your children while experiencing American culture for a year. This arrangement might be less expensive than a nanny, but au pairs typically have less experience.
Remember, they grow up
If calculating costs for daycare makes you want to throw a tantrum of toddler proportions, remember this life stage doesn’t last forever. Making the appropriate adjustments (and sacrifices) in your monthly budget might help you get through these years. Then it won’t be long before the kids are looking for summer jobs. And shopping for cars. And applying to colleges five states away. Oh never mind, just cherish their cute faces for as long as you can.
Things to Consider:
- If you’re able to, take advantage of the Child and Dependent Care Credit when filing taxes. It’s worth up to $3,000 for one child and up to $6,000 for two or more children.
- Find out if your employer offers access to a Dependent Care Flexible Spending Account. You can put aside up to $5,000 in pretax dollars.
- Research potentially less-expensive options like a nanny share, a home-based family childcare center, or possibly hosting an au pair.