Child Care Costs Almost as Much as Housing

Childcare costs are often the largest line item in the budget, rivaling the rent or mortgage. nimito/Shutterstock

One of the most challenging parts of being a parent is finding and paying for child care. The cost of child care has reached new heights. Child care costs are often the largest line item in the budget, rivaling the rent or mortgage.

But how much is child care in the United States? The actual cost goes beyond just penning that check every week. Is there anything that can be done about it? How do you cut child care costs?

Actual Cost of Child Care

Married or single parents often have difficulties finding appropriate child care. And when they do, they find that the cost is higher than they thought.

That newborn bundle of joy is about to cost almost as much as your mortgage. Here’s the breakdown of the cost for licensed center-based child care:

• $1,324: infant child care
• $1,096: toddler child care
• $$889: preschooler child care

To give you a comparison, in November 2024, the median asking rent price for an apartment in the United States was $1,595.

The national average salary is $63,795. That means a parent paying $15,888 a year for their infant spends almost a quarter of their salary on childcare.

Why Does Child Care Cost So Much?

Child care centers come under state labor laws. They must hire enough adults for a certain number of children. It’s important to have proper supervision. Many states have strict laws regarding child care centers.

Location is another critical factor. These are brick-and-mortar businesses. You can’t do this online. Real estate costs and many child care centers must be in areas where people work. That often means urban areas with higher rent.

Parents want to send their children to a quality child care center. That means employees must be up to date on safety and education training. Many employees have certifications. This costs money.

But there are some ways you can reduce your child care costs.

Consider Staying at Home

Married couples with a dual income may find it financially smarter for one of them to stay home. This is particularly true if one parent has a low or entry-level salary. Even with a decent salary, if you have more than one child in child care, your salary could be eaten away.

Staying at home doesn’t just apply to moms, 18 percent of parents who stay home with their children are fathers.

Dependent Care Flexible Spending Account

Some companies offer a dependent care flexible spending account (FSA). Single parents can contribute up to $2,500 with pretax money per year. Married parents who file jointly can contribute up to $5,000 annually.

When you contribute, you can use the tax-free money in your FSA to pay for various child expenses. These include child care, babysitting, nannies, before or after school care, and summer day camps (no overnights).

These funds apply to dependent children 13 or younger.

Be aware that you must use the money the same year you contribute or you’ll forfeit the money, so plan your child care expenditures. Here’s a FSA calculator from Boston University to help you.

FSA vs. Child Dependent Care Tax Credit

The child and dependent care tax credit is based on your income and the expenses that you incur for the care of qualifying persons. This is to enable you to go to work or school.

The child dependent care tax credit is up to $4,000 for one qualifying person and up to $8,000 for two or more qualifying persons. It’s potentially refundable. So, it’s possible not to owe any taxes if your income is low enough.

But can you use the FSA and child credit together?

If you have one child, you can either claim the tax credit or the FSA, but not both. If you have two or more children, you may be able to claim both.

But there’s much to consider before deciding how to claim the benefits. It’s not that cut and dry. Research and calculate the savings from both, and then choose the one that fits your circumstances.

Look Into Various Assistance Programs

You can apply for child care assistance if you’re an active-duty service member. There are several available. From child care in your home to military child care in your neighborhood, a program is available for you.

There’s also the Childcare and Development Fund (CCDF). This is for low-income families. The CCDF helps with paying for child care. States and local organizations provide vouchers, scholarships, cash assistance, and more

Head Start is another service available for low-income people. Early Head Start is available for children up to three years old, and traditional Head Start is for three- to five-year-olds.

Seasonal Child Care Options

Some parents only need help when school is out of session. Contact local summer camps like those through the YMCA or YWCA and see if they have scholarships available for camps. Whatever camp you can find, always ask about aid.

Child Care Costs Overwhelming

When planning a family, child care is probably one item that should be on the list. If neither parent plans to stay home, child care could become a large financial issue.

Investigate child care facilities in your area, not just for their reputation but also for their cost. If you find one that is affordable and checks all the boxes, consider putting your name on the waiting list.

Take advantage of FSA and child credits effectively. Contact an accountant to see which one is best for you.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.