Makin' Money

The high cost of quality child care

Chris Farrell Apr 4, 2011

Millions of Americans are among the “working poor.” They have jobs, yet earn so little that they live at or below the government’s official poverty line. Even more families are among the “near poor.” These families have incomes above the poverty line, but may be just one car repair or broken leg away from poverty. Many middle class families are struggling these days to maintain their homes and their dream of sending their children to college. Economic and financial insecurity is widespread.

A recent study tries to tabulate the threshold requirements for basic economic security over a lifetime for a variety of families, from single workers to two-income couples with children. The Basic Economic Security Tables offers a series of baseline measurements that include everything from income to emergency savings to retirement assets. The data is for 2010.

I want to highlight one striking expense from the report for families with children: The high cost of quality child care. It’s a striking personal finance story:

The high cost of quality child care is the greatest threat to many families’ security, and in many places across the country, the cost of child care threatens a second parent’s ability to work and increase family income. In most families with two or more young children, child care is the largest expense.

Here’s a budget breakdown of expenses for a worker on the edge of economic security, with no children:

Expenses, 2010 Percent budget

Housing 28%
Transportation 20%
Net taxes 14%
Personal & Household items 12%
Food 10%
Utilities 6%
Health care 5%
Emergency savings 3%
Retirement savings 3%

The comparable table for 1 worker with 1 preschooler child and 1 schoolchild:

Expenses, 2010 Percent budget

Child care 22%
Housing 17%
Net taxes 13%
Food 11%
Transportation 11%
Personal & Household items 9%
Health care 8%
Utilities 4%
Emergency savings 3%
Retirement savings 2%

The study calculates that a family with two preschoolers that meets the basic economic security measure pays $1,280 a month for quality child care. Thanks to the cost of child care, the income needs of a 1-worker family with two preschoolers is almost as high as for a 1-worker family with five teenagers. (Teenagers don’t require care.)

The study is a joint venture among Wider Opportunities for Women, a nonprofit, the Center for Social Development at Washington University, and the School of Social Work-University at Buffalo, SUNY.

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