Child care is getting more expensive, putting even more financial pressure on American families at a time when they’re already paying more for groceries and gas.
According to a recent survey from Care.com, nearly two-thirds of parents say child care costs have gone up in the past year. As a result, 59% are more concerned about how much they will spend on child care this year compared to previous years.
“It’s eating up wallet share and doesn't leave money for other goods,” Care.com CEO Tim Allen told Yahoo Finance (video above). “We have seen an exponential increase in nanny rates as well as daycares and child-care centers.”
As costs rise, more than half of American families are spending 20% or more of their annual income on childcare and 72% spend 10% or more. To put this in perspective, child care is considered ‘affordable’ when it costs families 7% or less of their household income, according to U.S. Department of Health and Human Services (HHS).
The average cost of a nanny for one child rose to $694 per week in 2021 and $226 per week for daycare centers. That’s up 22% and 24% respectively compared to 2019.
The survey also found more than half of families plan to spend more than $10,000 on child care this year, more than the average yearly cost of in-state college tuition.
As the cost of childcare increases, parents are left with a tough choice, with many making lifestyle changes as a result. Some are choosing to forego vacations or non-essential purchases just to afford childcare, while others are considering a part-time job or leaving the workforce altogether.
Nearly a third of parents reported they are considering taking on a second job while 26% are reducing hours at work, 25% are looking to change jobs and 21% are leaving the workforce entirely.
“People are reconsidering luxury goods or non-essential goods such as travel and vacations,” Allen added. “People are going to reduce their spending just to afford childcare so it has this knock-on effect economically as the economy tries to rebound from the pandemic.”
Seana Smith is a reporter and anchor at Yahoo Finance. Follow her on Twitter at @SeanaNSmith