Inflation is hitting families with young children most, Fed study shows

Nobody is feeling the pinch of inflation more than parents—thanks to "absurdly expensive" childcare.

According to the New York Fed’s survey of household finances, 64% of parents with kids under 18 said they were doing at least okay financially, down sharply from 75% in 2021.

By comparison, 72% of the overall population said it was doing okay financially as of 2023.

Like other adults, parents cited inflation as their biggest financial burden, with the cost of raising kids continuing to rise.

The Fed study also found that parents with young children were more likely to experience hunger, partly because childcare consumed a growing portion of household budgets.

Separate data from Care.com echoes these concerns, showing that average annual childcare costs will reach a staggering $16,692 per child in 2024.

Nearly half of parents told Care.com they were spending more than $18,000 per year on childcare.

“Childcare is absurdly expensive in our country, and people are struggling,” said Ailen Arreaza, executive director at ParentsTogether Action. “We are in a crisis now.”

Unfortunately, the crippling costs of raising a family aren’t expected to improve anytime soon.

The true cost of raising kids

According to a new study by Creditnews Research, the average annual cost of raising a child in America’s 100 largest cities is $22,989.

That means parents need to earn a whopping $91,608 to provide for one child, $114,898 for two children, and $133,197 for three children.

The study factors in food, healthcare, housing, childcare and civic engagement expenses, internet and phone, and transportation to determine the “price tag” of raising a kid.

Expenses are a lot higher in places like California and New York, where it costs more than $32,000 per year to raise one child.

While raising kids has always been expensive, experts blame the pandemic for pushing prices off the charts.

Economists at the Brookings Institute said the U.S. is in a “Covid-19 baby bust,” referring to the expected drop in births because of the pandemic.

The pandemic “undoubtedly made the prospect more daunting for many, with fluctuating food and housing prices and a tumultuous job market.

As a result, many potential parents decided to wait,” wrote Isabel V. Sawhill, Morgan Welch, and Chris Miller of the Brookings Institute.

A recent survey by NerdWallet found that 31% of Americans under 60 who don’t have kids don’t plan on becoming parents because childcare costs are too high.

For the same reason, about one in five existing parents with kids under 18 said they don’t plan on having more children.