In this state, parents pay one-third of their income on childcare

A new report says American families who pay for child care are spending nearly a fifth of their income on the service, and costs are rising.

The average household with childcare bills spends $325 per week, or 18.6% of its weekly income, according to an analysis by LendingTree, a personal finance site.

In Nevada, the most expensive state for child care, families spend 32.3% of their income, an average of $493 per week, on others to care for their children, the report said.

LendingTree released the analysis last month, based on Census data.

Child care expenses eat up more than a fifth of parental income in eight other states, including Illinois, Louisiana and Texas, the report found.

‘It felt like a necessity’

Childcare costs pushed Morgan Frey out of her home in Sparks, Nevada.

Frey, 31, paid $245 a week for childcare for her son, now five. That was half of her take-home pay, from her job as a caregiver to seniors. In February 2023, poverty forced her and her son into a homeless shelter.

“It was really hard,” she said. “And honestly, the decision to keep him in school came down to knowing that it was what was best for him. It felt like a necessity.”

The next month, help arrived. The Children’s Cabinet, a Nevada nonprofit, stepped in to collect Frey’s childcare costs. In June 2023, she and her son moved to a new home.

“I have enough money to put gas in the car and food on the table,” she said.

Only now does Frey realize how stressed she has become with childcare bills.

“I can be a more present parent,” she said. “We play catch. We go out and do stuff.”

Several economic factors have driven up costs and increased supply in the child care sector, experts say.

One of these is inflation, which has caused prices to rise in recent years. Another is the pandemic, which has closed thousands of child care centers. A third is the expiration of pandemic-era federal funding for child care centers last fall, a cut that looks like a “child care cliff” to the observer.

“There’s so much that goes into good child care, whether it’s wages, rent, insurance or 500 other things,” says Matt Schulz, chief credit analyst at LendingTree. “If the cost of everything rises, it makes sense that the cost of childcare will too.”

The story continues

A childcare desert

Nevada, the most expensive state for child care, is an example of the national problem and health care challenges specific to the state.

Childcare options in Nevada are scarce, due to population growth, a shortage of providers and a hospitality industry whose workers need childcare at all times.

“In addition to being in the real desert, it’s full of what they call childcare deserts, where there’s just not enough supply for all the demand that’s out there,” Schulz said of Nevada. “It stands to reason that any place growing that quickly would have trouble keeping up with demand.”

The LendingTree analysis shows that the average child care client in Nevada pays about one-third of the state’s median weekly household income of $1,529.

New Jersey ranks second in child care costs, at $442 per week, but that amount reflects only 19% of the Garden State’s median weekly household income, $2,325.

Montana ranks second in the share of parent income spent on child care: 22.6%, or $372 per week for a family income of $1,643.

Which state has the cheapest child care?

The cheapest childcare state? Iowa, with an average weekly cost of $182, or 10.1% of the state’s average weekly household income, $1,812.

Other recent reports are sounding a similar alarm about the rising costs of child care.

The 2024 Cost of Care Report from the healthcare website Care.com shows that the average family spends 24% of their family income on childcare. The report is based on a November survey of 2,000 adults.

According to the federal Department of Health and Human Services, “affordable” child care means no more than 7% of a family’s income is spent on the service.

“It is certainly the case that child care costs have risen faster than inflation,” said Elise Gould, a senior policy analyst at the Economic Policy Institute, a nonpartisan, left-leaning think tank that has also studied child care costs in depth.

“What we discovered a few years ago is that childcare is more expensive than rent for many families. And that was quite shocking.”

A looming cliff for childcare

The federal government’s Child Care Stabilization Program, dating back to the pandemic, provided $24 billion in assistance to child care programs. This included wages and benefits, rent and utilities, which helped keep struggling programs afloat.

These funds expired in September, paving the way for programs to raise prices, lay off workers or close down.

Parents are reporting “higher costs, longer wait lists, daycare closures and greater difficulty finding care than in previous years,” said Sean Lacey, general manager of childcare at Care.com. “The supply of childcare is decreasing, while demand continues to grow.”

Care.com’s report shows that weekly child care for one child cost an average of $321 in 2023, up from $284 in 2022. Child care cost $293 per week, up from $268.

A 2023 report from the Annie E. Casey Foundation came to similarly dire conclusions. Caring for one child cost an average of $10,600 in 2021, the study found. That’s a tenth of the median income for a married couple and over a third of a single parent’s income.

A paralyzing choice between healthcare and career

The crippling costs of child care are forcing many parents, especially mothers, to make a difficult choice between care and career.

According to the Casey Foundation report, 13% of children ages five and younger lived in homes where someone quit a job, changed jobs or turned down a job because of child care conflicts.

Women are several times more likely than men to experience negative consequences from their work due to caring responsibilities, the report said.

“No parent should be forced to choose between their family and their work, which unfortunately happens all too often,” Lacey said.

Mothers often leave the workforce rather than spend a large portion of their salaries on child care, financial experts say. That choice could unravel their life career prospects.

“Sometimes it feels like you’re working just to pay for childcare,” says Catherine Valega, a certified financial planner in Boston.

Nevertheless, Valega urges her female clients to stay in work.

“I’m just a big believer in staying in the market,” she said. “I think it’s important to keep your skills up to date, but I also think it’s important for your own mental health.”

Care.com offers some tips for parents to manage childcare costs:

Find the best care for your budget

Care.com and the Economic Policy Institute offer calculators for child care costs by region. They can help you choose the right provider.

Want to put some money away? These places offer the highest interest rates and the lowest fees.

Talk to your employer

Many companies offer family care benefits, including on-site child care, child care subsidies, flexible spending accounts and supplemental child care.

Set aside pre-tax money for child care

With a dependent care account you can spend a maximum of € 5,000 on healthcare costs.

Take advantage of tax benefits for childcare

For those who qualify, the Child and Dependent Care Tax Credit covers up to $3,000 in expenses for one child, and $6,000 for two or more children. The actual credit is a percentage of those expenses.

This article originally appeared on USA TODAY: Childcare desert: Report finds rising costs, centers thinly spread