Jill On Money: The high cost of parenting
Parents, it’s not just you: It really does cost a lot to raise a child in the United States.
The annual Child Cost Aware of America (CCAoA) report is out and the results are staggering. The national average price of childcare for 2023 was $11,582 – and that’s just the AVERAGE!
In many parts of the country, especially those that have seen shortages of labor which have caused childcare facilities to close, prices can swell to two or three times that amount.
The report notes “it would take 10% of a married couple with children’s median income to afford this national average price” and it would take 32% of a single parent’s median income to afford the national average price.
For context, the U.S. Department of Health and Human Services recommends that “childcare should not cost families more than 7% of their annual income.”
That HHS 7% recommendation seems to be woefully out of date, which is likely why the Department of Labor launched The National Database of Childcare Prices (NDCP) last year.
The NDCP is “the most comprehensive source of local childcare price data… As a share of family income, the NDCP shows that childcare prices are untenable for families across all care types, age groups, and county population sizes.”
Of course, this is not breaking news for American families. In fact, the cost of childcare has been steadily rising over many years.
Just before the global economy shut down in early 2020, The Atlantic journalist Annie Lowrey described a long term, “multifarious and strangely invisible economic crisis” in which American families were hammered by rising rents, larger out of pocket health costs, skyrocketing college tuition and soaring childcare costs.
These trends, which she called “The Great Affordability Crisis Breaking America,” occurred amid a strong recovery and yet, “for millions, a roaring economy felt precarious or downright terrible.”
The pandemic years exacerbated the childcare issue, because when care centers shut down, their workers left the industry, in search of higher paying jobs. They didn’t have to go far to beat their previous income: According to the Bureau of Labor Statistics, the median pay for a childcare worker in 2023 was $14.60 per hour or $30,370 per year.
One result of costly childcare is that it can push workers out of the labor force, at least until their kids go to school, which can put a dent into their long-term savings.
Alternatively, some turn to family for help. Perhaps chipping in for the care of grandchildren isn’t a hardship, but the younger generation is often asking for help well before they have kids of their own.
A recent Bankrate survey found that almost half of adults aged 23 or older say they’ve received ongoing financial assistance from parents or guardians for housing, for everyday expenses and for paying down or off debt.
Presuming that the older generation is financially stable, providing some assistance should be fine. But 61 percent of the parents say that helping their kids has meant making significant sacrifices in their own lives, like dipping into their emergency savings (43%), paying down/off debt (41%), or pulling back on their retirement savings (37%).
If there is an emergency, parents are going to provide a backstop. But when helping kids puts retirement security at risk, that’s a problem. After all, no parent wants to be in the position of asking their children to help them later in life.
Before sending money, be sure to have concrete conversations about how long the assistance will last and then create a plan to help the younger generation become financially independent.
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com