What Is the Average Cost of Daycare (and How Can You Budget for It?)

The Average Cost of Childcare

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It’s no secret that having children is expensive. In fact, it’s estimated that raising a child to age 17 now costs a staggering $233,610. Paying for daycare can be one of the major financial challenges for working parents. And it’s a common issue: Recent statistics show that in nearly half of all two-parent households, both parents work outside the home.

Many women are also choosing to return to work after having children; 70 percent of women with children under age 18 are a part of the workforce, according to the Department of Labor. Other moms are using income from side gigs to support their family. We explore the average cost of childcare, some money saving strategies when paying for childcare, and how childcare cost reform could benefit us all.

Average Daycare Costs

The average cost of childcare ranges from $4,000 to $22,600 annually, depending on location and age of the child, according to information from the Economic Policy Institute (EPI).

Childcare also accounts for a large portion of a family’s annual income, the institute found. Adding insult to injury is the fact that many families pay out of pocket for childcare – and the cost of such care is inflated partially due to the lower teacher/caregiver-to-child ratio.

For example, the EPI found that childcare in Ohio for a 4-year-old cost $7,341 annually, while infant care costs $8,977 per year, which is 4.9 percent more expensive than rent in that state.

In Alabama, childcare for a 4-year old costs $4,871, and infant care is $5,637. In New York, the costs increase dramatically to $11,700 and $14,144 for child and infant care, respectively. California is also pricey, at $8,230 for annual childcare and $11,817 for infant care. Keep in mind that these are only the estimated costs of childcare for one child. Once families have more than one child, their childcare costs can double.

Alternatives for Working Parents

With price tags like this, parents may consider alternatives to traditional childcare. Working from home is one option – and it’s definitely a growing trend, with nearly 43 percent of all employees now working remotely. However, it still may be necessary to obtain some sort of childcare, depending on the demands of the job. Hiring a part-time caregiver or local teen may be a good option in this situation.

It also may be wise to utilize tax-advantaged accounts, like a Dependent Care FSA, which allows you to contribute pre-taxed dollars to an account earmarked for eligible childcare costs. Eligible costs include preschool, day camp, even care for dependent adults.

The Child and Dependent Tax Credit is another great way to take the sting out of growing childcare costs since the amount you can claim is regardless of your income and it directly reduces your tax bill, dollar-for-dollar.

Other options to consider are nanny shares with other parents or friends with children, even utilizing the onsite daycare at your workplace. Bonus: Many onsite daycares allow you to pay fees pre-tax, which also can save you money.

Is Childcare Reform on the Horizon?

In recent years, many policymakers and leaders have pointed out that the rising cost of childcare is unsustainable for many American families, especially those working at minimum wage jobs.

There’s also been a slight decline in women working outside the home, due in part to the rising cost of childcare. The percentage of women choosing to stay home with their children increased slightly to 29 percent in 2012, up from 23 percent, Pew Research found.

A major issue with the financial obligations of childcare is how costs vary so greatly from state to state, making budgeting for care more difficult. For example, monthly childcare for a 4-year-old ranges from $344 to $1,472 per month, depending on geographic location and age of the child. Keep in mind that these costs also can be affected by the number of children a family has. Childcare costs can quickly balloon in families with 2 or 3 children.

Another factor that supports childcare cost reform? In 33 states (and the District of Columbia), the cost of infant care is more than the cost of in-state tuition at a public, 4-year college. Now that’s reason for reform.