Study: Care For One Infant Costs At Least 10% Of A Family’s Yearly Income In 48 States

A typical week for Diana Carter, a 35-year-old entrepreneur with three children based in Charlotte, North Carolina, and her husband involves coordinating daycare pickup and drop-off for their middle child.

But that’s just the tip of the iceberg. They homeschool their oldest son and have family stop by multiple times a week to help with their youngest child and other caregiving and household chores.

If that’s not enough to make ends meet, the cost of childcare looms over your head. Carter and her husband pay $315 a month for part-time childcare for one of their daughters, and expect that amount to increase to $570 a month once their youngest child starts attending a half-day program at their church’s preschool.

“If I were to put my children in full-time child care, I would have to seriously consider my budget and whether it would make sense for me to take a step back from my career,” she says.

Raising children is one of the biggest expenses for parents no matter where they live in the country. A new Bankrate analysis finds that in 48 states and the District of Columbia, full-time, center-based care for one infant costs at least 10 percent of a typical family’s annual income.

In some states, such as New York and Hawaii, the cost of caring for an infant can take up about 20 percent of a typical family’s annual income. Additionally, some of the country’s cheapest states, such as New Mexico and Kansas, are surprisingly expensive for infant child care.

Our findings pull back the curtain on infant child care costs across the U.S., revealing where the costs are the most affordable and least affordable. Whether you live in a state with high or low infant child care costs, our analysis suggests there are ways for parents across the country to cope with exorbitant child care costs.

No matter where your family lives in the U.S., the cost of caring for an infant is high.

To assess the affordability of child care across the United States, Bankrate looked at the percentage of median annual income spent on full-time, center-based infant care for a child in 2023. Data for the analysis was obtained from the U.S. Census Bureau and Child Care Aware of. America, an advocacy organization that works with state and local child care resource and referral agencies. We also used data from the BLS’s 2023 Consumer Expenditure Survey to compare the national average price of infant care to other large expenses in a typical household’s budget.

Child Care Aware of America estimates that the average cost of full-time, center-based care per infant in the United States was $14,070 in 2023. According to our research, this is more than the average annual household budget for food ($9,985 per year), health care ($6,159 per year), and transportation ($13,174 per year). On average, the only expense that is higher for households is housing ($25,436 per year).

Nationally, $14,070 per year per infant in full-time center-based care equates to an average of $1,173 per month. According to data from the U.S. Census Bureau, the median annual income for families with children under 18 in the U.S. in 2023 is $95,721. That means you would need 14.7% of your family’s average income to be able to afford the national average price. Our analysis shows costs vary widely by state and region.

According to an analysis by the Center of American Progress, childcare costs are typically highest for infants and toddlers, and become progressively less expensive as children get older. However, it can vary widely depending on the type of child care provider, the age and number of children in the household, and where the family lives.

The average price for full-time, center-based infant care ranges widely from $7,862 to $25,480 per year in all 50 states, including the District of Columbia. This shows that the high cost of child care is impacting parents across state lines, forcing many to strategize their budgets, dip into their savings or take a step back from their careers.

In nearly half of the states in the United States (24 states), a higher percentage of household income is spent on infant care than the national percentage (14.7 percent). In 27 states, the percentage of household income spent on infant care is equal to or lower than the national percentage.

The experts we spoke to explained that the large regional differences in childcare costs across the country are likely due to differences in the cost of living, local childcare supply and demand, and regional labor forces.

“Most of the time, it’s driven by regional differences and local labor markets,” says Elliott, child and family policy expert and author of “Crawling Behind: America’s Child Care Crisis and How to Fix It.” Haspel says. “I don’t think it’s fair to say that child care is more widely available, more affordable, more accessible, and more plentiful in any state in America.”

Sandra Bishop, senior director of research at Child Care Aware of America, said that for basic health and safety reasons, child care facilities must have a high child-to-adult ratio. He said 70 to 80 percent of costs are due to labor costs. At the same time, childcare workers are underpaid, leading to industry-wide talent shortages and high turnover, Bishop said. A recent analysis by the Federal Reserve Bank of Chicago found that the median wage paid to child care workers ranks in the bottom 5% of all occupations.

“We’re basically subsidizing this system on their (workers’) backs,” Bishop said. “That’s the dilemma.”

While childcare providers across the country are struggling to keep their doors open, many parents can’t afford to pay more. The end of September 2024 marks one year since federal subsidies for child care providers ended due to the coronavirus disease (COVID-19). This left many families scrambling to find affordable child care. Additionally, child care costs have risen sharply over the past 30 years, more than 1.5 times faster than overall inflation since January 1991, according to Bankrate’s analysis of BLS data.

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5 states with the lowest cost for infant care

51. New Mexico, 20.5%
52. Hawaii, 20.1%
53. New York, 19.6%
54. California, 18.7%
55. Massachusetts, 18.4%

New Mexico is the least affordable state for infant care and has the highest percentage of income required for child care per infant (20.5%). Last year, the median income for families with children under 18 was $65,952, and the cost of full-time center-based child care for an infant averaged $13,521.

Although the average cost of infant child care in New Mexico is modest compared to other states, the median income of New Mexico households is relatively low, resulting in a higher percentage of household income being allocated to child care. Masu.

Despite being ranked #1 as the most affordable state, New Mexico is one of the few states that broadly supports subsidized child care and strives to ensure that most families have access to child care. . In 2022, New Mexico will double eligibility for families from twice (200 percent) to four times (400 percent) the federal poverty line and expand the state’s child care subsidy program, according to a statement from the New Mexico Governor’s Office. expanded dramatically. That means a family of four earning up to $124,800 a year could qualify for free child care, and thousands more would qualify.

Hawaii, New York, California, and Massachusetts round out the top five states where households spend the highest percentage of their income on child care for young children. In these states, the typical family spends at least 18 percent of their income on infant child care.

In addition to New Mexico, some of the more affordable states in the country also have some of the lowest costs for full-time, center-based infant care. For example, in Kansas and Minnesota, the average cost of child care per infant is 16.6 to 17.3 percent of each state’s annual median household income.

New Mexico isn’t alone in trying to lower child care costs for families. Other states and cities have followed New Mexico’s lead and recently enacted policy reforms to make child care more affordable for families in their communities.

5 States with the Most Affordable Infant Child Care

1. South Dakota, 8.7%
2. North Dakota, 9.8%
3. Utah, 10.3%
4. Idaho, 10.9%
5. South Carolina, 11.2%

In areas where child care is more affordable, such as South Dakota, North Dakota, and Utah, the typical family spends nearly 10 percent of their income on child care for young children.

South Dakota is the most affordable state in infant care and spends the lowest percentage of household income on child care for an infant (8.7%). In South Dakota last year, the median annual income for families with children under 18 was $90,343, and child care costs for an infant averaged $7,862.

Although the average cost of infant child care is more affordable for the typical family in South Dakota than in other parts of the country, a 2023 study by the nonprofit ReadyNation found that the state’s current child care system lacks access and It was found that the quality was inadequate.

Nearly half (43 percent) of South Dakotans live in child care “deserts,” with three or more children under the age of 5 for every available slot in a licensed child care center, according to the ReadyNation report. Additionally, South Dakota’s licensing standards are among the most lenient of any state in the country, allowing in-home child care providers to care for up to 12 children before being required to register with the state.

According to data from Early Learner South Dakota, little is known about the quality of care many children in South Dakota receive, as only 22% of providers were licensed or registered with the state as of 2019. No.

North Dakota, Utah, Idaho, and South Carolina round out the bottom five states where families spend the lowest percentage of their income on infant child care. According to the Center for American Progress, child care deserts are concentrated in South Carolina, Utah, and Idaho, as well as in South Dakota, making it more difficult for families to find quality child care on a budget. That’s what it means. In these states, infant child care can cost a typical family 9.8 percent to 11.2 percent of their income.

How should parents deal with high child support costs?

Childcare costs can place a significant financial burden on families. This is especially a burden for today’s parents, who have been hit by the recent recession caused by the coronavirus, high inflation, and high interest rates. To manage high child care costs, consider taking the following steps.

Explore financial aid and resources in your state or county

You may be eligible for child support assistance without even realizing it. For example, a family of four in New Mexico with an annual income of up to $124,800 can qualify for free child care through the state’s child care subsidy program. Consider contacting your local or state family services office to learn what services, tax breaks, and financing opportunities are available for child care. Child care resources and referral agencies also provide one-on-one assistance to families to learn more about child care in their area. Whether you’re looking for referrals to local child care providers or information about where you can get help paying for child care, Child Care Aware of America’s state-by-state child care resource database has you covered. It shows you the direction.

Compare childcare options in your area

Get recommendations from parents in your area, tour day care facilities, and get multiple quotes from child care providers near you to ensure you’re getting the best quality care at a price that fits within your budget. Waiting lists for daycare centers can be several months long, so it’s important to be proactive in finding a daycare center that you can afford.

Claim tax credits for dependents

You may be able to offset your care costs this year or next by claiming the Child Tax Credit and the Child and Dependent Care Credit. The Child Tax Credit is a $2,000 benefit available to parents of dependent children under the age of 17. The child and dependent care deduction allows parents to deduct a percentage of the expenses paid for the care of eligible individuals up to $3,000 ($6,000 for two people). In addition to the federal tax credit, some states, such as California, Colorado, and New York, may offer a state-level child tax credit.

Automate your finances

Parents are busy, so it’s important to automate household finances as much as possible. Set up automatic contributions to your retirement and high-yield savings accounts, and easily track your spending on a weekly and monthly basis using a budgeting app or spreadsheet.

Start saving early

If you’re planning on starting a family but are still a few years away, CFP’s Robin Snell recommends starting saving for child support early.

“For most people, it’s kind of confusing,” she says. “The more you can plan for child support, the better.”

One of Snell’s most important tips is to set up split direct deposits. This allows a portion of your paycheck to go into a high-yield savings account and a portion into a checking account to cover your necessary and discretionary expenses. She says this accomplishes two things. One is to know when your checking account budget is starting to get tight, and to avoid not paying yourself in the first place.

CFPs typically recommend having multiple savings accounts for different financial goals, such as an emergency fund, a “fun” fund, a down payment fund, and a childcare fund. To keep your savings on autopilot, set up automatic monthly contributions to other savings accounts in addition to split direct deposits.

Check out your Flexible Spending Account (FSA)

FSAs may be available as part of your employee benefits package, and certain types of benefits can be used to offset child care costs. A dependent care FSA allows you or your spouse to contribute funds throughout the year and use those pre-tax funds to reimburse child care costs.

This reduces your income that is subject to tax. Each household can contribute up to $5,000 per year, or $2,500 if married couples apply separately, but these funds must be spent by the end of the year or they will be lost.

“Every dollar is a loss in income,” says CFP Julie Jenkins.

Get creative with your budget

Jenkins said that as childcare costs become more expensive, parents may need to find ways to budget and cut back on expenses. That might mean canceling some monthly subscriptions, buying more affordable second-hand clothing, or adjusting your grocery shopping list to match items on sale.

“Childcare is a burden on families, so families need to budget and make space for childcare,” she says. “Know your goals and values ​​when creating your budget and make sure your spending is truly aligned with your values.”