FOR MANY FAMILIES, THE cost of day care and other child care services swallows up entire paychecks, blows up budgets and makes it difficult to save for other financial goals.
Are You Too Broke to Be a Parent?
These days, child care costs frequently outpace mortgage and food bills, according to a 2018 report from Child Care Aware of America. In fact, the cost of child care for two children exceeds mortgage costs in 35 states and the District of Columbia. In 28 states and the District of Columbia, center-based infant care is pricier than annual tuition at a public four-year college.
The high cost of child care leaves many families struggling to cobble together affordable care arrangements or worrying about whether it makes sense for two partners to stay in the job market. "It's definitely one of the most pressing issues that's facing working families with children," says Zane Mokhiber, data analyst at the Economic Policy Institute, which provides an interactive state-by-state breakdown of child care costs.
So how do families afford the pricey cost of child care and day care? Here's what to know.
What Does Child Care Cost?
The national average cost of child care is about $9,000 to $9,600, according to the 2018 report from Child Care Aware of America. But experts note that those figures don't tell the whole story.
What you'll spend on child care expenses, including infant care or day care, will vary based on where you live, the age of your child and the services you access.
Families will typically pay more to place an infant in care because they require lower staff-to-child ratios, says Jessica Tercha, director of research at Child Care Aware of America. Families may also pay more for center-based child care over family child care services.
In general, high cost-of-living states, such as Massachusetts, California and the District of Columbia, tend to see high child care costs as well. For example, the least affordable state for center-based toddler care was Massachusetts, with the annual cost running $18,845 per year, according to Child Care Aware. That's 65% of median single-parent income and 15.5% of married-couple median income.
Child care becomes unaffordable if it costs more than 7% of a family's income, according to the U.S. Department of Health and Human Services.
And, experts note, that while day care and infant care are expensive for families, child care workers are also struggling to make ends meet. "Child care is unaffordable for families, but child care providers are a lot of times just barely getting by," Tercha says. So expecting providers to accept lower pay is often not a popular solution.
Instead, families have to learn how to budget carefully, take advantage of federal and state subsidies and tap their networks. It isn't easy, but it can make a difference to their out-of-pocket costs.
How Can I Reduce the Cost of Child Care?
Families struggling to afford the cost of child care should look to tap federal, state and employer-based benefits, experts say. Here are some resources for reducing the cost of child care:
Federal and state tax credits.
Child care subsidy programs.
Your personal network.
Federal and state tax credits. Tax credits can take a bite out of your day care bills, as long as you can wait until tax season to reclaim some of the money spent on child care. Some tax credits may not be tied to paying for child care exclusively but can still be used to reduce those expenses.
The child and dependent care tax credit is available to families who paid care expenses for an eligible child or adult. The credit amount is based on a percentage of your adjusted gross income and can be no more than $3,000 for a single child or $6,000 for two or more qualifying children. It is a nonrefundable credit, meaning it can bring your taxes to $0 but can't trigger a tax refund.
The child tax credit is for eligible families and worth up to $2,000 per qualifying child. A portion of the credit is refundable, and it begins to phase out, or lose value, for families making above a certain modified adjusted gross income.
The earned income tax credit can also reduce taxes for eligible moderate- and low-income families, with larger credit amounts available to larger families.
Your state may offer tax credits to complement these federal offerings, so make sure you look into claiming any of your local tax credits as well.
Employee benefits. Check with your employer to determine whether there are employee benefits parents can utilize. "I always remind clients to revisit this during open enrollment and take advantage of flexible saving accounts," wrote Marguerita M. Cheng, certified financial planner and co-founder of Blue Ocean Global Wealth in Gaithersburg, Maryland, in an email.
A dependent care flexible spending account allows parents to save up to $5,000 in pretax money to cover child care, including day care, nannies and infant care, for a dependent younger than age 13.
Your employer may also offer access to child care services or flexible work arrangements, such as a work-from-home day per week in order to help defray child care costs. When her kids were young, Cheng managed to arrange a late start in order to avoid paying for before-school care.
Child care subsidy programs. You may be able to find assistance via the Child Care and Development Block Grant through which the federal government offers grants to states to provide for child care subsidies or vouchers to low-income families. Reach out to your local or state child care resource agency to investigate your options, Tercha says.
The child care and development block grant is "not a perfect program, but it does make a real difference for families who are able to receive it," says Karen Schulman, child care and early learning research director at the National Women's Law Center. She notes that some states are more generous than others, and you may have to sit on a waiting list, even if you're eligible. So look into whether you qualify to receive this subsidy early in your child care search.
Your personal network. If you're fortunate enough to live near friends and family, consider taking advantage of their help to reduce the cost of child care services. Can you engage in a nanny share with a neighbor? Is there a nearby parent or sibling willing to help watch your child one day per week? "I would say to start looking early, ask for referrals. If you don't have family in the area, consider helping a neighbor out," Cheng says.
If lack of access to affordable child care has you peeved, experts recommend acting on a larger scale. Parenthood is busy, but take a moment to call your senator or speak with local representatives about policy changes public officials can enact to make access to affordable child care the norm. Being able to afford astronomical child care expenses isn't always about learning to budget better, Mokhiber says. "This is not just an issue of personal inadequacies in budgeting; it's more of a widespread problem that we think should be a significant target for public policy and investment."