Parents Spend up to 19% of Their Income on This Necessity
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Rising prices have pinched Americans' wallets over the past couple of years, but one major expense was already eating into parents' budgets long before inflation reared its head: child care.Recent inflation-adjusted U.S. Department of Labor data shows that parents spend between 8% and 19% of their median family income on child care expenses.Yikes. And I thought a $350 quote for my kids' swim lessons was bad.Here's what's happening with child care costs, and a few suggestions to make it more affordable.Child care costs an average of $11,582 annuallyTo get a more complete picture of how much parents are spending on child care, a Child Care Aware of America (CCAoA) report found that average child care costs were $11,582 last year -- up from $10,174 in 2020.Of course, costs can vary depending on where you live. Here are the annual costs in four regions of the U.S. for households with two kids in child care centers:Northeast: $32,614West: $26,536Midwest: $23,803South: $22,549So, why are child care costs so high? A handful of issues are pushing costs higher, including state requirements for child-to-caregiver ratios, the location of the child care centers, and high insurance costs.How to save on child care costsUnfortunately, child care will likely remain a significant expense in parents' budgets. But the good news is that there are a few ways to help reduce your costs -- try these.1. See if you qualify for the Child and Dependent Care CreditThis credit can apply to parents who are working or looking for work and pay for child care for a child under 13. The credit can be worth 20% to 35% of your child care expenses, up to $3,000 for one child or $6,000 for two or more children.Tax software like Intuit TurboTax can help you determine whether you qualify.2. Open a Dependent Care Flexible Spending Account (DCFSA)You can use pre-tax money in a DCFSA to help cover the cost of child care for children under the age of 13. With these accounts, you estimate how much you'll need for child care expenses and set the money aside at the beginning of the year.For 2024, the limit is $5,000 for married couples filing jointly or $2,500 if single or filing separately.3. Consider hybrid workWhile this option may not be available for everyone, recent Gallup data shows that 54% of work locations offer hybrid work schedules. I have friends who've asked for flexible work schedules and their bosses and their workplaces have agreed to it. Even eliminating one day per week of child care expenses could save you money.4. Look for scholarshipsI worked as a YMCA camp counselor for a summer in college, and plenty of families received scholarships for the weekday camp. Some scholarships will consider your household income and how many people are in your family. A small scholarship could go a long way to reducing your child care costs, even if it's temporary.It's nearly impossible for some parents to avoid paying for child care. That's why looking into government credits, scholarships, and even negotiating a different work schedule with your boss may be worth the effort.Alert: highest cash back card we've seen now has 0% intro APR until nearly 2026
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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuit. The Motley Fool has a disclosure policy.
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