More millennials these days are choosing to not have children. There are lots of reasons why, but one of the main ones on the list is the high cost of raising kids. These financial costs are causing many to abstain from child-rearing.
It used to be that one of the biggest financial costs (and impediments) to raising a child is the cost of a college education. Parents have to start saving hundreds of dollars a month almost as soon as the fetus is implanted in the womb in order to come close to saving the average cost of a college education.
But these days, parents are feeling the financial strain earlier and earlier, thanks to the rising costs of daycare. As one mom put it: “I told my financial advisor when he started asking about saving for college: ‘if I figured out a way to pay for my son’s nanny, I can figure out a way to pay for college.'”
According to the National Association of Child Care Resource & Referral Agencies, the average cost of center-based daycare in the United States is $11,666 per year or $972 a month. The costs can vary widely depending on where you live and quality of care, but prices generally range from $300 to $1,564 monthly.
How Families Pay for Childcare
Daycare costs are swallowing anywhere from 10-20% of a family’s monthly budget.
Mike Buchmann and his wife, Shannon, spend 10% of their monthly budget on daycare costs. In fact, that’s almost half of the cost of their mortgage. In states such as Mississippi and West Virginia, “child care costs account for 40 to 45 percent of total household income.”
The bottom line is that child care costs are breaking the family budget. With such high costs, many families are finding it impossible to save anything at the end of the month. Others forgo retirement contributions in order to make childcare more manageable.
With childcare now costing more than rent, it’s no wonder that so many women are leaving the workforce. It’s not worth it to work when your paycheck only covers daycare.
Saving on Daycare Costs
So what is a family to do when they can’t afford to have a stay-at-home parent but childcare costs are eating into their monthly budget?
Find ways to reduce costs.
Obviously, childcare is one of the areas where no one wants to skimp on quality of care. But there are ways to maintain a high quality of care without feeling like you’re sacrificing an organ.
Consider the many ways to save money on childcare, such as:
- Doing a nanny share and splitting nanny costs with another family
- Trading care with a friend
- Investing your time in a daycare co-op which will often have subsidized payments
- Using a dependent care account for the tax savings
- Selecting an in-home daycare with excellent reviews and recommendations.
I work part-time and recently needed a few hours covered when my schedule changed. Instead of automatically paying more for childcare, I asked a friend with a daughter same age as my son if she wanted to swap some hours with me. It worked out because now they’ll be saving $45 a week in care costs as well!
The Bottom Line
Childcare costs can be prohibitive for many families. It’s important when making the decision to start a family that you also tackle how you’ll pay for these costs.
For us, we started preparing to start a family by paying off our debt, and then saving 20% of our monthly take-home pay. We can no longer afford to save that much, because childcare costs have eaten into our savings. But, we are not living paycheck to paycheck and have managed to stay ahead. We also found a stay-at-home mom with school-aged children to watch our son for two to three days a week, which is a huge savings from traditional daycare.
It’s best to be prepared when it comes to managing childcare costs, rather than to be surprised.
How are you saving on daycare costs? Are they breaking your budget?