When a new child care center opened recently in Nashville, more than 100 parents camped out overnight in hopes of snagging a spot. If you think it’s absurd that parents have to secure child care the same way we purchased concert tickets as teenagers, you’re not wrong. Unfortunately, the analogy is apt: Just like those tickets, child care in 2022 is pricey and elusive for the average person.
That’s the main takeaway from the 2022 Cost of Care Survey, released today by Care.com. Costs for every kind of child care have increased during the pandemic, according to the survey of more than 3,000 parents with children under 15 years-old. The national average weekly cost of a nanny jumped to $694 (up from $565 in 2019), while the average cost of a child care center increased to $226 (up from $215). Family care centers and after-school sitters were also more expensive.
In the most expensive areas for child care, including Washington, D.C., Washington state and Massachusetts, prices are even higher. In Washington, D.C., parents pay an average of $419 per week for care at a childcare center, and $855 for a nanny.
“The pandemic had a massive impact on what was already a broken child care system. It’s been reported that 9,000 childcare centers have closed since 2020, so it’s not surprising that costs have gone up,” says Natalie Mayslich, president of the consumer side of Care.com. “Along with that, the way parents are working has also impacted their care needs, so we’re seeing more parents look for in-home care that they can configure to their schedules. The good news is that there are in-home caregivers available. But they are commanding higher wages so, yes, costs are likely to stay high.”
Those increases are having a big impact on parents’ finances. More than half of families (51%) say they will spend more than 20% of their annual household income on child care in 2022. The U.S. Department of Health and Human Services defines affordable care as 7% of household income, so that means over half of families are paying significantly more than they can afford for child care.
Of the more minor (but meaningful) impacts of rising child care costs, families say they are scaling back their spending on vacations and travel (51%), leisure activities (51%), food and dining (45%), clothing (41%) and extracurriculars (37%).
But there are more profound implications, too. Of the 35% of parents who say they’re less likely to have more children, nearly half (43%) list the rising cost of child care as a major reason why. For parents who have struggled with child care costs, America’s declining fertility rate is no mystery. It’s a direct result of a system where families pay far more for child care than our peers in other developed countries.
Parents are also making career sacrifices to afford care, with 31% considering taking on a second job, 26% reducing their hours at work, 25% changing jobs, and 21% leaving the workforce entirely.
Unfortunately, it’s not just the cost that’s made care out of reach for many families—it’s finding help in the first place. While in-home care might be available, nabbing a spot at a daycare or preschool—which tend to be more affordable—is tough. (Just ask those parents in Nashville.) Waitlists at many child care centers are now two years long or more, as a combination of staffing shortages and permanent closures during the pandemic have reduced an already-limited number of spots in many cities.
Hopefully Congress will come through with help for working families, but in the meantime, we asked the experts at Care.com how parents can save cash:
The Fix: 3 Keys to Reducing the Cost of Child Care
By Maressa Brown, Senior Editor, Care.com
If you’re concerned about the cost of child care, you’re not alone. More than half (59%) of parents say they’re more concerned about the expense now than in years prior, according to the Care.com 2022 Cost of Care Survey. But there are ways to cut those costs… and some may surprise you.
1. Sign up for a Dependent Care Account
If your employer offers this type of Flexible Spending Account (FSA), you can set aside up to $5,000 tax-free to pay for child care. You can save around $2,000 depending on your marginal tax rate, says Tom Breedlove, Senior Director of Care.com HomePay.
The FSA covers expenses for daycare, preschool, nannies, babysitters and even summer day camps— anything child care related that’s needed so you can go to work or attend school.
Set aside the amount you truly need and spend it because FSAs are “use it or lose it,” so at the end of the year what hasn’t been spent will be forfeited. And keep good records, as you must submit receipts to your HR department. Each spouse can contribute to an FSA account, but total family contributions cannot exceed $5,000 per family per calendar year.
And you don’t have to wait until open enrollment, says Breedlove. If you have a life-changing event, such as the birth of a child, a marriage or a change in child care needs, you’ll have 30 days to enroll in this FSA so be sure to connect with your HR department.
2. Pay legally and you get tax credits for child care expenses
With or without access to an FSA, you may be able to take advantage of the Child and Dependent Care Tax Credit, says Breedlove. This credit allows you to itemize up to $3,000 in expenses per child per year, up to a $6,000 annual cap per family. Once you’ve itemized the expenses, you can apply a tax credit percentage based on your income. Most families will see a 20% savings, which means you’ll save up to $600 if you have one child and up to $1,200 if you have two or more children.
Tip: Families with two or more children and who have access to a dependent care FSA may be able to take advantage of both tax breaks. To optimize your tax savings, we recommend using the FSA for the first $5,000. That will leave an additional $1,000 of expenses that can be applied to the tax credit.
This nanny tax calculator will also tell you how much money you can save from these tax breaks. Note: If you hire a nanny, you must pay legally in order to take advantage of these tax breaks.
In addition, parents can save $2,000 per child using the Child Tax Credit.
3. Know the going rate for child care in your area.
The cost of child care varies widely from one community to the next. Make sure you’re not paying too much for where you live by checking the average rate for full-time care in your area, using Care.com’s cost of child care calculator.
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