Child care is now more expensive than rent for a substantial number of Americans, according to a recent LendingTree report. Newsweek spoke to an expert about what this means for those considering or in the throws of parenthood.
The study found child care now costs 39.4 percent more than rent across 100 of the largest U.S. metros. This was true for the average monthly cost of full-time center-based child care for two children, which was estimated at $2,182.
That was 39.4 percent higher than the average monthly cost to rent a two-bedroom unit, $1,566.
“Costs are likely forcing lots of parents in these metros to make difficult choices, including whether to go back to work after the little one arrives and whether to have another child,” LendingTree’s chief credit analyst, Matt Schulz, said in a statement.
A daycare center employee pushes a KinderVan filled with preschool children on an outing along the National Mall in Washington, D.C. Childcare for two children is now more expensive than rent in major U.S. cities. (Photo by Robert Alexander/Getty Images)
Robert Alexander/Getty Images
“Also, it means parents in these metros likely have less disposable income to get themselves ahead in their financial goals. Higher childcare costs mean less ability to build emergency funds, grow retirement savings, put money toward mortgage down payments and more. That’s especially true given that none of these metros typically have high incomes.”
While the average monthly cost of infant child care is 22.2 percent lower than the average monthly rent, families who choose to have more than one child or pay for day care for older children can see far higher costs in cities across America.
“Sometimes a facility may offer a discounted rate for a family with two children enrolled at their facility, but that’s not a guarantee, nor is it likely to be a massive discount,” Schulz said in the report. “Any way you slice it, securing day care for that second child is going to be expensive, unless you have trusted friends or relatives willing to pitch in.”
The cost of child care has become an increasingly strong barrier for many young Americans in deciding to start families, as the average family spends 18.6 percent of their income on their children’s day care or nanny, the report found.
Due to these economic realities, child care is now a salient topic in the upcoming presidential election, said Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group.
“Many parents are facing tough decisions about whether to stay in the workforce due to skyrocketing child care costs,” Thompson told Newsweek. “The primary reason for these rising costs is the increasing demand. Parents who work need a reliable place to care for their children, and that demand continues to grow.”
Parents are essentially being forced to choose between earning an income by working or staying at home to take care of their children, Thompson said.
“For families with two or more children, it often doesn’t make financial sense to keep working when childcare costs outweigh the benefits of a second income,” Thompson said, adding that birth rates are already declining as millennials and Gen Z delay having children or choose not to have them at all.
When parents can’t afford to find a child care provider in their area, they often end up having one stay at home or relying on family. This leads to economic consequences far beyond the personal finances of one individual family.
Michael Ryan, a finance expert and the founder of michaelryanmoney.com, said child care facilities are also still dealing with a supply crunch after the pandemic shuttered many daycares. But there’s more to the story of the rising costs.
“Child care isn’t just babysitting anymore,” Ryan told Newsweek. “We’re talking about early childhood education, a field that requires skilled professionals. They deserve fair wages, and that drives up costs further.”
For many families, the higher costs equate to paying a second mortgage.
“In many cases, one parent’s entire salary is going to child care. It’s forcing tough decisions,” Ryan said. “Because of this, I’ve seen young couples putting off having kids. They can’t afford child care. Others are scaling back their career ambitions to stay home with the kids.”
LendingTree’s chief credit analyst Jacob Channel echoed this sentiment.
“In a nutshell, high child care costs make a lot of people feel damned if they work and damned if they don’t,” Channel told Newsweek.
