Why Childcare Has Become So Unaffordable | Business Insider

It would cost you about $25,714 to raise a child this year. That's about half the average American salary. It hasn't always been this expensive, and there's a couple of reasons why costs have gone so high up. I'm Katie Notopoulos. I'm a senior correspondent here at Business Insider. So here are the costs you need to consider if you're planning on raising a child. So, there's food. You wouldn't believe how many berries small children eat. There's child care. Someone to watch the little one. Oh, you got transportation. The MetroCard might not cut it. You might need a car. Oh, and you get the clothing. But they outgrow it every three months. It's nonstop. Of course, some of these costs might vary a little bit for you, but it's going to add up to almost $26,000 a year. That cost has gone up 42% since nearly a decade ago. And the biggest part of that is going to be child care. The average cost of child care per year, per child, is $10,853. That's about 10% of the median income for a married couple, 33% of a single parent's income. The cost of child care has gone up about 115% since the year 2000. And just to understand, that is way, way more than the average rate of inflation for everything else in the economy. Some places are more expensive than others. For example, in Massachusetts, which has the highest average cost, it would be about $25,000 for an infant in child care. Iowa, which is a little bit cheaper, it's maybe more like $11,000 per year. So why have the costs gone up so high? So first of all, there was a lot of federal funding during COVID that went into daycares that has now dried up. There's also a labor shortage. It's really hard to hire daycare workers. They are not well paid. So what's the deal then? A lot of those workers might choose to go become a private nanny, where it's a little more lucrative too. And then also, they might have kids of their own that they want to stay home with. So if you're putting so much of your income into child care, how does that impact the rest of your life? One big thing that really it affects is whether or not parents of young children can afford to purchase a home for the first time. A recent study found that the cost of the average mortgage plus average child care for a family with two working parents is about 66% of their total income. That makes the idea of being able to own a home and have a kid nearly impossible for a lot of people. And in some areas, like Los Angeles or San Diego, where there's really high costs of real estate, that's actually over 100% of their average income. As a result of that, you're seeing families moving to areas that have cheaper costs of real estate, lower costs of living. You're also seeing parents drop out of the workforce. And also, we're seeing a lot of people who just choose not to have children because of the high costs. Right now, about half of young people who don't have a kid say they don't want a kid. So is child care doomed to be expensive all over the world? Not really. Other developed countries just don't have these problems. The United States has the second highest cost of child care of any developed country other than New Zealand. So in the U.S., the government spends about $500 that it contributes towards each child's early childhood care. In other countries, it's a lot higher. So, for example, in Norway, it's close to $30,000 a year. But there is some light at the end of the tunnel. So those crushing child care costs only really exist for the first few years that a child is still a baby and they're in daycare. And finally, when they turn five and go to kindergarten, they go to free public school. And all of a sudden, not all of those costs, but a big one goes away. And they turn from a baby into a mermaid child. And, of course, you still have to feed them. You still have to give them clothes. They want to play soccer. They need braces. There's lots of costs still. I'm not saying it's cheap. But you don't have that every single month child care bill coming in exactly. For me personally, I have one child who's in public school and one who's still in daycare. And I am just waiting, waiting for that day that she finally goes off to kindergarten and I don't have to pay this massive daycare bill anymore. So I think that very often these costs are not really the main thing that people are thinking about when they're thinking about whether or not they want to be a parent and they want to have children or a child. And they are definitely something that once you have a child, you are very much thinking about all the time.