Childcare costs soar in 2024—Is there relief in sight?
The American dream, including marriage, 2.5 kids, and a house, comes with a heftier price tag than ever in 2024.
According to a report by online marketplace Care.com, childcare has become nearly impossible to afford.
Almost half of the parents questioned in the study shared that their monthly childcare expenses surpassed $1,500 last year, or $18,000 annually. Close to 50% of them are preparing for a similar bill this year.
Meanwhile, one-fifth of parents spent over $3,000 each month on childcare last year, with about one-quarter of them expecting to pay the same amount in 2024.
Here is where the rubber meets the road. More than half of the parents questioned by Care.com say that they are prepared to dole out at least $600 more each month on childcare this year, adding $7,000-plus to the sum.
Many of those families are having to wait in line to pay, with nearly two-thirds of parents having found themselves on a daycare waitlist at some point.
Whether turning to a daycare or a nanny, the average weekly childcare costs increased between 4% and 13% compared to 2022.
The problem isn’t just the total cost of childcare—it’s the share of household income that it eats up.
Per the U.S. Department of Health and Human Services (HHS), childcare should reasonably cost parents 7% of their household income. However, as the Care.com study showed, actual childcare costs eat up 24% of monthly household budgets.
No wonder many parents are having to dip into their savings as well as their 9-5 pay to afford it.
Care.com CEO Brad Wilson says that “parents are being forced into a financial hole that is nearly impossible to climb out of” by the time a child reaches five years old. He warns that the “crushing weight of childcare costs” has thwarted a family’s ability to both save and spend money.
While economic signals like easing inflation and a strong labor market have been positive, many parents may be left out of that recovery for a while.
It’s not surprising to learn that family sizes have been shrinking. For example, in 1960, the typical household had 2.33 children under the age of 18. As of 2023, that average fell to fewer than two kids per family, as per Statista data.
As the Care.com study revealed, 35% of parents are turning to savings to afford childcare. No wonder over 50% of Americans are living with under three months' worth of emergency savings in the bank, according to Bankrate.
Experts say the ballooning cost of childcare creates other challenges that could impact a child’s development.
If “parents aren’t able to work consistently because of childcare challenges, that creates financial instability in their households. And we know that children don’t thrive when they grow up in poverty,” said Lisa M. Hamilton, president and CEO of the nonprofit Annie E. Casey Foundation.
“High-cost childcare—or a lack of affordable childcare—can be disruptive to families’ long-term financial security, and increases in costs due to inflation can add up,” Suzanne Schmitt, an executive at New York Life Insurance, told Fortune.
“Childcare hinges on workplace and societal support, as the childcare sector has faced significant challenges, which has had a downstream effect on parents,” she said.
So, what are parents doing to continue working and afford childcare at the same time?
The Care.com study showed that more than one-quarter of respondents have taken on multiple jobs. But some have gone in the opposite direction.
A 2023 survey by BabyCenter found that 45% of working moms are strongly considering leaving work or reducing their hours because of childcare costs.
The situation has gotten worse since the end of Covid.
Why things seem to be getting worse
During the pandemic, government subsidies provided $24 billion in support to childcare providers. That funding expired at the end of Q3 2023, prompting providers to raise fees to fend off the risk of lower enrollments or worse—closing their doors.
Also, during the pandemic, Americans accumulated “unprecedented levels” of excess savings, peaking at $2.1 trillion in 2021, according to the San Francisco Fed.
Now, the Fed says that those savings have dwindled to below pre-pandemic levels, averaging about $100 million each month. Rising childcare costs are likely to blame for a sizable chunk of that drawdown.
The fallout from high childcare costs has far-reaching implications that extend beyond only families with children and into the broader economy.
A study out of Florida—one of the nation's fastest-growing states—found that elevated childcare costs are costing the state nearly $5.4 billion each year. That's $5.4 billion in lost productivity, employment, and consumer spending.
Parents who are forced to quit work because of childcare expenses “make up the largest segment of the workforce, and if we’re losing potentially a couple hundred thousand of them a year, that's going to be detrimental to our economic growth,” said Kyle Baltuch, senior vice president at the Florida Chamber of Commerce.