Day Care Costs More than College?

The Rising Costs of Child Care

Day Care Costs More than College?
August 26, 2014

As parents of preschoolers, you may be looking over the family bills and wondering how you are ever going to afford to send your kids to college. You may have an even more immediate problem if both of you work – how to pay for adequate child care?

For the 2012-2013 school year, the average annual bill for public university tuition and fees was $8,655. According to the 2012 report released by Child Care of America (CCA), the average annual cost of full-time child care for an infant was greater than that in a little over half of the 50 states.

Granted, there are other costs associated with college – the average total cost for a public university including room, board, and other costs in 2012 was $22,261 – however, because of differences in subsidies from various governments, the costs to parents are similar. Direct payments from parents cover around 60% of childcare costs and only about 23% of college costs.

In short, in some areas it can cost as much for preschool child care as it can to send your child to college. For single-parent families in some areas, childcare costs can consume over 50% of their median income. If you want to reduce your interest payments and lower your debt, try the free Debt Optimizer by MoneyTips.

The CCA report goes into great detail about the demographic differences by state, as well as rural vs. urban areas with respect to types of child care and households represented. However, the overarching message is that childcare costs are rising faster than inflation and outrunning increases in family incomes by a factor of eight.

Why are costs so high? It certainly isn’t in the salary of the childcare professionals. In 2012, the average childcare worker’s salary was $12,310 – below 2011 values when adjusted for inflation.

Even so, child care is by definition labor intensive if done correctly, and labor is a majority of the childcare cost. Licensed childcare facilities have a significant amount of other overhead expenses such as rent, insurance, food, and supplies. These costs vary by state based on the regulatory environment and cost of living in that particular state.

State regulations on minimum standards for safety, square footage for play areas, the total number of children whom can be safely supervised per each adult, and similar factors are going to dictate costs in that state – explaining some of the significant cost differences by area.

Simple supply and demand also plays a role, with localized quality childcare shortages driving up the price.

What can you do if you are barely able to afford quality child care, and assistance from family members is not an option?

  • Alternate Day Cares – Nonprofit/Ministry based daycare or family home daycare is a less expensive option, if it is safe, reliable, and meets your needs.

  • Assistance Programs – Look for any state and local grants, and see if any reimbursement program is available through your employer, or if your schedule can be altered.

    Working from home may help, but if you are taking care of an infant or toddler, that is pretty much a full–time job. Make sure your job is compatible with that sort of arrangement.

    If your employer offers a Flexible Savings Account (FSA) allowing you to set aside money for childcare costs, consider that as well

  • Tax Credits – The Child and Dependent Care Tax Credit allows you to itemize expenses (up to $3,000 per child with a $6,000 cap) and take a tax credit on a percentage of those expenses. Make certain to take advantage of this credit if you itemize deductions.

  • Shared Care – You may be able to enter a shared care or co-op agreement with other parents whom you trust and who have a work schedule that is complementary to yours.

It takes patience and planning to provide for your child from birth all the way through college – but it’s an investment that is well worth the effort.

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