Do Your Childcare Costs Cost More Than Your Mortgage?

Astronomical childcare costs have become a major issue for US families, and a new survey shows just how dire the state of the national childcare industry has become.

Recent Report on Childcare

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Anxiety around rising rent and property prices has been rising exponentially in recent years. But a recent report suggests that childcare costs may be an even bigger concern.

Childcare Costs Soar

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The annual report from Child Care Aware of America, a non-profit that works to promote affordable childcare across the country, has found that childcare costs are draining US bank accounts even more than housing costs – especially for families with more than one child.

More Expensive Than Rent

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According to the report, childcare for two children now costs 25% more than average rent payments in every state across the country, including Washington D.C.

11 States Most Affected

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Childcare costs are so high that in 11 states professional care for two children costs twice as much as average rent payments.

The States in Question

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These states include Illinois, Indiana, Iowa, Kansas, Massachusetts, Minnesota, Nebraska, Pennsylvania, Rhode Island, Vermont, and Wisconsin. Washington D.C. is also on the list.

Homeowners Shoulder the Burden Too

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It’s not just renters who are feeling the strain – prospects are also concerning for homeowners. Childcare for two children now exceeds annual mortgage payments by anywhere from 1% to 64%.

A Significant Portion of Income

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Based on the report findings, the average married couple has to spend 10% of their joint median income to afford the country’s average childcare costs for two kids. The burden is significantly more severe for single parents who have to shell out 32% of their median income to pay.

More Than Recommended

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These statistics fly in the face of recommendations by the U.S. Department of Health and Human Services, which states that Americans should not be spending more than 7% of their income on childcare.

Nearly $12000 Per Child

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As of 2023, the average cost of childcare reached $11,582 per child. Despite the enormous cost, the report did make some marginally optimistic observations.

Some Optimistic Signs

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As of yet, childcare costs have not outpaced the inflation rate, and the annual increase was lower than it has been since 2020. While the average costs increased by 4.5 to 5% each year from 2020 to 2022, it dropped down to 3.7% in 2023.

Shining a Light

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While these statistics are not a blanket reality for all Americans, many of whom have unique economic and educational arrangements for their children, it does shine a light on the changing landscape of childcare in the country, and the plight of low and medium-income families.

States Take Action

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State governments across the US are beginning to address soaring childcare costs in their jurisdictions, but Child Care Aware spokespersons are doubtful as to whether their efforts are enough.

Expiring Pandemic Grants

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This is in large part due to the expiration of vital grants that were handed out to childcare centers during the Covid-19 pandemic, which amounted to $24 billion in federal pandemic stabilization grants. They came to an end in September last year.

End to $15 Billion Subsidies

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Working-class families also saw direct childcare subsidies from $15 billion worth of federal pandemic infusions. These are set to expire in September this year.

Doing Their Best

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Many states are doing a lot to invest in their child care systems, but it is hard to do it at the scale of those critical investments that happened as a part of our relief funding,” said Child Care Aware chief of policy Anne Hedgepeth.

State-Specific Solutions

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Now that pandemic relief grants are officially being phased out, unique state-specific solutions are needed to prop up the precarious childcare industry.

Using What They Have

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These solutions look different from state to state. New Mexico is now diverting petroleum revenue into childcare subsidies, while Washington state has raised taxes on investment properties to fund the system.

A Bipartisan Problem

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Though Democratic states have made a bigger push toward investing in childcare, it has moved far beyond a partisan issue.

Kentucky Program

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Last year Kentucky started a program to cover and/or heavily subsidize the cost of childcare for parents who work in the childcare industry in an attempt to hit two birds with one stone by relieving financial strain and attracting more childcare workers.

We Can’t Afford to Ignore It

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These recent measures are heartening, but whether they will be enough has yet to be seen. As the Child Care Aware report states, unaffordable childcare is “a challenge we can’t afford to ignore.”

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The postDo Your Childcare Costs Cost More Than Your Mortgage? first appeared on Liberty & Wealth.

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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.

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