Solutions to Reduce Childcare Expenses and Financial Strain
Disclaimer: Good Day, Readers. WealthBuildingPowers blog is a financial literacy/competency blog and does not provide specific investment recommendations.
THE COST OF CHILDCARE IS ON “CRACK”!
I was shocked when a friend told me his family is paying close to $3,000.00 monthly for childcare. SAY WHAT!!!! This is more than my last mortgage payment!
I cannot recall what we paid for Amanda’s childcare, but it did not exceed our mortgage payment! Childcare and housing costs in this country have shot up like a Space X rocket. {“Why did Boeing’s space capsule refuse to return to Earth? Because it heard the return was once in a lifetime!”}
RISING COST
The average annual cost for infant care in a center-based facility is ONLY ~$20,000.00. The price for a four-year-old is ONLY ~$13,000.00. These figures vary significantly depending on the region, with urban areas typically experiencing higher costs. Consider the median household paying this cost had an income of about $70,000 in 2022. This is simply unaffordable
USING (2014) AS A BASELINE – PAYING FOR CENTER-BASED CHILDCARE IS UNAFFORDABLE FOR MOST FAMILIES
- Median Household Income: $54,000
- Cost of Housing: $18,000 (average annual cost)
- Cost of Childcare: $15,000 (average annual cost for two children ages 1-5)
- Cost of Health Care: $16,000 (average annual household cost)
| Year | Median Household Income ($) | Cost of Housing ($) | Cost of Childcare ($) | Cost of Health Care ($) | Remaining Income ($) |
| 2014 | 54,000 | 18,000 | 15,000 | 16,000 | 5,000 |
| 2015 | 55,458 | 18,900 | 15,720 | 16,832 | 3,006 |
| 2016 | 56,917 | 19,772 | 16,483 | 17,693 | 2,969 |
| 2017 | 58,625 | 20,621 | 17,291 | 18,570 | 2,143 |
| 2018 | 60,484 | 21,694 | 18,137 | 19,517 | 1,136 |
| 2019 | 62,539 | 22,755 | 19,019 | 20,495 | 270 |
| 2020 | 64,468 | 23,758 | 19,940 | 21,520 | -2,750 |
| 2021 | 66,593 | 24,915 | 20,897 | 22,587 | -5,806 |
| 2022 | 68,916 | 26,089 | 21,898 | 23,783 | -8,854 |
| 2023 | 71,399 | 27,416 | 22,940 | 25,046 | -10,003 |
WHO CAN AFFORD KIDS!
Remaining Income: Calculated as Median Household Income minus the sum of Housing, Childcare, and Health Care costs. This table shows the financial impact on a household’s remaining Income after accounting for housing, childcare, and healthcare costs over ten years.
I did not subtract the cost of federal and state taxes, property taxes, home insurance, car insurance, utility payments, gasoline payments, cell phones, broadband, Netflix, etc., food (you got to eat), or clothing. The reality is that more than 50% of Americans can no longer afford to buy a home or pay for childcare, and the others must have expenses (taxes, food, utilities, transportation). And let’s not forget that the majority will not earn a pension and must contribute to a 401k or equivalent retirement program.
We are slowly strangling the middle class, and both federal and state taxes are likely to increase sooner or later, depending on which party controls the White House, House, and Senate.
I often read the U.S. birthrate is declining. Is it any wonder? I worry, can my daughter afford what she grew up with? Our childcare, housing, and college costs have climbed much faster than average inflation and are well outpacing any compensation gains.
WHAT CAN YOU DO TO REDUCE COST
- Family and Friends: If blessed/lucky, you may have reliable family and friends in the area. My grandmother and Aunt took care of me for three years. This arrangement can significantly reduce costs but may not always be feasible due to distance or the availability of willing and capable caregivers.
- In-Home Care: Hiring a nanny or an au pair offers personalized care but can be costly. Some parents opt for nanny-sharing arrangements with other families to split the costs.
- Daycare Co-ops: Parents take turns caring for each other’s children in these cooperative arrangements. This option requires a high level of commitment and cooperation among participating families.
- Flexible Work Arrangements: Many parents work split shifts, allowing a parent to take care of the children. Who needs sleep? Remote work, flexible hours, and job-sharing can help parents manage childcare responsibilities and reduce costs by allowing them to spend more time at home.
- Government Assistance: Programs like the Child Care and Development Block Grant (CCDBG) provide financial assistance to low-income families. Tax credits like the Child and Dependent Care Credit can alleviate some financial burdens. Generally, the federal guideline suggests that families with incomes up to 85% of the state median income (SMI) may be eligible for childcare assistance. However, many states set their eligibility thresholds below this level due to funding limitations and other state-specific factors.
- .Below are examples of the income limits for eligibility in various states:
- California: As of recent data, a family of three can have an income up to approximately $67,450 per year (about 85% of the SMI).
- Texas: A family of three can have an annual income of around $47,790.
- New York: A family of three can earn approximately $60,240 annually.
WE CAN NOT AFFORD A NATIONAL SOLUTION
Federal and State budgets are constrained and, therefore, unlikely to offer significant assistance.
The absolute best thing that happened to me was becoming a dad. I pray those with that desire can one day hold the most precious being you have ever seen! I promise you; it will fill your heart.
DO YOU DESIRE CHILDREN? SOME IDEAS
- Consider living closer to one set of grandparents if they are capable and willing to help.
- If you plan to buy, you can always buy a small home and later upside as your income increases. Start with a reasonable size and cost home
- Start saving for childcare before little Styron is born.
- Reduce the cost of weddings and honeymoons and save that money
- Maybe a younger relative wants to attend college in your area and can help out between classes while living with you to save money.
- Some employers have on-site daycare, which may offer savings.
- Do the math and determine if one parent should leave work and care for the kids. Maybe he can do some paid work from home.
Fixing the Child Care Crisis
Conclusion
I worry about my daughter and future generations. The list of unaffordable costs further separating us into the Haves and Haves NOTs is expanding, including Child Care Health Care, College Costs, Homes, etc.
Two thoughts:
- We must help future generations better manage money and savings, increasing their financial literacy.
- We may slowly transition into a nation with more in common with a socialist country.
If I were King for a day, I would delete our current ineffective K-12 US education system. I believe for the same tax dollars, if we stop wasting money like Hunter Biden on Crack, we could offer childcare to Two Years Community College! We improve the kids’ education (I assume the primary priority of our schools) by implementing lessons from other countries, successful U.S. school districts, and charter schools. I would eliminate teachers’ unions whose demands seldom help a child.
You may be thinking that is a significant and impossible ask! President John F Kennedy once inspired our nation to be the first to land a man on the moon and SAFELY return him! Let’s set that same ambitious, audacious goal for education and protecting our children.
APPENDIX 1.0
Below is a 10-year table showing each year’s percentage increase in Earnings, Housing, College Tuition, and Health Care. The data is based on historical trends and typical estimates. The percentages may vary depending on specific economic conditions, policies, and other factors.
| Year | Earnings Increase (%) | Housing Increase (%) | College Tuition Increase (%) | Health Care Increase (%) |
| 2014 | 3.0 | 4.5 | 5.0 | 5.5 |
| 2015 | 2.7 | 5.0 | 4.8 | 5.2 |
| 2016 | 2.8 | 4.6 | 5.0 | 5.1 |
| 2017 | 3.0 | 4.3 | 4.9 | 4.9 |
| 2018 | 3.2 | 5.2 | 4.7 | 5.0 |
| 2019 | 3.4 | 4.9 | 4.6 | 4.8 |
| 2020 | 3.1 | 4.4 | 4.5 | 4.7 |
| 2021 | 3.3 | 5.3 | 4.8 | 4.9 |
| 2022 | 3.5 | 4.7 | 5.1 | 5.3 |
| 2023 | 3.6 | 5.1 | 4.9 | 5.2 |
These percentages reflect typical annual increases for each category:
- Earnings: The yearly increase in wages and salaries.
- Housing: The annual increase in the cost of housing, including rents and home prices.
- College Tuition: The annual increase in college tuition and fees.
- Health Care: The annual increase in health care costs, including insurance premiums, out-of-pocket expenses, and medical services.
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YOUR GREATNESS IS NOT WHAT YOU HAVE; IT’S WHAT YOU GIVE! – SOME CHARITIES I SUPPORT
St Jude Hospital: The mission of St. Jude Children’s Research Hospital is to advance cures and means of prevention for pediatric catastrophic diseases through research and treatment. Consistent with the vision of our founder Danny Thomas, no child is denied treatment based on race, religion, or a family’s ability to pay.https://www.stjude.org/
Wounded Warrior Project: An American charity and veterans service organization that offers a variety of programs, services and events for wounded veterans of the military https://www.woundedwarriorproject.org
Folds of Honor: Providing life-changing scholarships to the spouses and children of America’s fallen or disabled military. And now, our mission expands to the families of America’s first responders. On our watch, those who protect our freedoms and our families will know they are not forgotten. https://foldsofhonor.org
Wilson’s No-Kill Animal Shelter: A N0-Kill shelter that is a top-rated non-profit. They compassionately care for all their animals. https://wilsoncountynokillanimalshelter.mywcn.com/
Tunnel To Towers: Since 9/11, we have been helping America’s heroes by providing mortgage-free homes to Gold Star and fallen first responder families with young children and by building specially adapted smart homes for catastrophically injured veterans and first responders. We are also committed to eradicating veteran homelessness and helping America to Never Forget September 11, 2001. https://dogood.t2t.org/give/320847/#!/donation/checkout
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ABOUT ME
I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger with an NC. State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.
I left a corporate career because I desired to make a difference as a speaker and writer. I was blessed to be coached and mentored by strong women and men in my family and professional life. It is my time to serve and give back.
DISCLAIMER
I started my first business at ~13 years of age (a small but brilliantly created plant nursery). I am a successful investor in stocks, options, and real estate and am happy to share my finance and investment lessons. I am NOT a licensed financial advisor. Please do not construe my suggestions on this blog as recommendations for your situation. As an investor, you must establish your risk/loss tolerance. Investment in any asset involves risk, including complete loss.
Please seek your licensed CPA or fiduciary financial advisors for individual financial advice.
I write this weekly blog to make an impact by reaching an audience and demonstrating the need for financial literacy. I will help you get there.
