Today, an increasing number of millennials are opting not to become parents. One key factor underpinning this decision is the considerable financial burden associated with raising children. Formerly, some of the harshest financial roadblocks stemmed from the hefty price tag of college education. In fact, parents often start saving sizable amounts even prior to the baby’s birth, in an attempt to offset future educational expenses.
However, nowadays parents feel financial stress far earlier due to the escalating costs of daycare. One mom summarized it aptly, saying that she explained to her financial advisor that if she managed to afford her son’s nanny, she would also navigate a way to finance his college expenses.
The National Association of Child Care Resource & Referral Agencies reports that the average cost of institutional daycare in the U.S comes to $11,666 annually or $972 monthly. Though daycare costs fluctuate significantly across different regions and levels of care quality, they typically fall between $300 and $1,564 monthly.
PAYING FOR CHILDCARE – A STRETCH
Families are having to dedicate between 10 to 20% of their monthly budget to daycare costs. Mike Buchmann and Shannon, his wife, use 10% of their monthly income to finance daycare costs which make up nearly half of their mortgage expenses. In states like Mississippi and West Virginia, childcare expenses can amount to 40-45% of total household income. The high price of childcare is stretching family budgets thin and discouraging families from saving or contribuing to retirement funds.
As daycare costs exceed rent in many instances, it’s unsurprising that numerous women are opting out of the workforce, as their earnings would barely cover childcare.
CUTTING DOWN ON DAYCARE EXPENSES
Families unable to afford a stay-at-home parent can resort to different methods to alleviate the burden of exorbitant childcare fees. While no one wants to compromise the quality of childcare, there are solutions to reduce expenses without drastically affecting the care standard.
a) Sharing nanny services with another family.
b) Exchanging childcare services with a friend.
c) Becoming part of a daycare co-op which frequently offers reduced rates.
d) Reaping tax benefits by utilizing a dependent care account.
e) Opting for an acclaimed in-home daycare.
Make a wise decision about how you’ll manage these costs before starting a family. Preparing early on, like us, we paid off our debts, saving 20% of our take-home pay monthly before starting a family. Though our savings have reduced due to daycare costs, we’ve maintained a balance without living paycheck to paycheck, through prudent lifestyle and spending choices.
Preparedness is key when it comes to managing childcare costs.
Are childcare costs straining your budget? How are you managing or reducing daycare costs?
