American families face ‘exponential rise’ in child care costs: Care.com CEO
Child care is becoming more and more expensive, putting even more financial pressure on American families at a time when they are already paying more for groceries and gas.
According to a recent survey by Care.com, nearly two-thirds of parents say child care costs have increased over the past year. As a result, 59% are more concerned about how much they will spend on childcare this year compared to previous years.
“It eats up the share of wallet and leaves no money for other assets,” Care.com CEO Tim Allen told Yahoo Finance (video above). “We’ve seen an exponential increase in nanny rates as well as child care and daycare.”
As costs rise, more than half of American families spend 20% or more of their annual income on child care and 72% spend 10% or more. To put this into perspective, child care is considered “affordable” when it costs families 7% or less of their household income, according to US Department of Health and Human Services (HHS).
The average cost of a nanny for a child has risen to $694 per week in 2021 and $226 per week for child care. This is an increase of 22% and 24% respectively compared to 2019.
The survey also found that more than half of families plan to spend more than $10,000 on childcare this year, more than the average annual cost of tuition at universities in the state.
As the cost of child care rises, parents are faced with a difficult choice, and many are changing their lifestyles accordingly. Some choose to forgo vacations or non-essential purchases just to pay for childcare, while others consider part-time employment or drop out of the workforce altogether.
Almost a third of parents said they were considering taking a second job, while 26% are reducing their working hours, 25% are considering changing jobs and 21% are leaving the workforce altogether.
“People are reconsidering luxuries or non-essential goods such as travel and vacations,” Allen added. “People will cut spending just to afford child care, which has an economic ripple effect as the economy tries to rebound from the pandemic.”
Seana Smith is a reporter and anchor at Yahoo Finance. Follow her on Twitter at @SeanaNSmith
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