According to 2017 Cost of Care Survey data, almost a third of American families say they spend 20% or more of their income on child care.
That’s an average of $18,000 a year, childcare advocacy group Child Care Aware reports.
A majority of working parents (63%) say they’ve made big career decisions like changing jobs or asking for flexible work arrangements to help alleviate some of the pressure.
Almost a quarter of surveyed parents (23%) said they either went part-time or became a stay-at-home parent to save money on child care. Of those who did this, 26% walked away from annual incomes of $50,000 or more.
But this last option is more costly than some parents might estimate.
Using the Center for American Progress’ interactive child care costs calculator, we can calculate how much it would cost the average American woman and the average American man to leave the workforce entirely to care for a new child:
If the average female worker in America (according to the BLS, she made about $39,000 annually in 2016) leaves the workforce at 26 (the average age American women have their first child) to care for her first child for five years until her child enters kindergarten, and if she plans to retire at 67 (Social Security’s full retirement age) with a retirement savings plan of 6.2% employee contribution and 4.7% employer contribution (which is about how much Vanguard participants contributed last year) …
… then she loses out on more than $635,000 in total income, which includes lost retirement assets and benefits, lost wages, and lost wage growth.
If the average male worker in America (according to the BLS, he made about $47,700 annually in 2016) leaves the workforce at 27 (the average age American men have their first child) to care for his first child for five years until his child enters kindergarten, and if he plans to retire at 67 (Social Security’s full retirement age) with a retirement savings plan of 6.2% employee contribution and 4.7% employer contribution (which is about how much Vanguard participants contributed last year) …
… then he loses out on more than $850,900 in total income, which includes lost retirement assets and benefits, lost wages, and lost wage growth.
While some families may prefer a stay-at-home parent for personal, non-financial reasons, in the long term, for parents who must make these kinds of career decisions based purely on their finances, leaving the workforce really isn’t an option.
American parents are coming up with all manner of other plans to cover childcare costs but are finding that few of them are full-proof.
While TIAA recommends that people put at least 20% of their income away into savings, the top three things families said they did to cover child care costs in 2015 were: save less money, stop saving money entirely, and save less for retirement, which, when you consider compounded interest, could also costs thousands down the line.
And while Care.com found that most — 72% — budget in advance for the cost of childcare, 30% of those parents admit to going over this budget. What’s more, nearly a third of parents (32%) say they face taking on new or further debt to pay for child care.
Many parents are dissatisfied with this state of affairs, and they’re looking outside the family for help.
A whopping 85% of parents say they wish their employer offered child care benefits like discounted child care and access to back up child care.
When asked how child care costs make them feel, 53% of the families surveyed by Care.com said American culture doesn’t do enough to support working parents, and 47% said they wish the US would take a note from other countries and subsidize child care.
SOURCE: Business Insider