This family makes 'really good money' - and spends $70,000 of it on child care

By Venessa Wong

'We are perhaps reaching a point where this is unsustainable,' economist says

Paige Connell spends almost $70,000 per year on child care for her four children, which includes full-time daycare for her 2-year-old and 4-year-old, as well as after-school programs, summer camp and day camps during school holidays for her 6-year-old and 7-year-old, who attend public school.

"We make really good money relative to the median income in our country, and even with that, it's still difficult because of how expensive it all is," Connell, a 34-year-old operations manager for a retail company in Massachusetts, told MarketWatch. The family's child-care expenses are equal to about 30% of their household income.

The U.S. fertility rate fell to a record low in 2023, and the cost of having children is among the factors behind that trend. Raising children in the U.S. has become financially difficult for virtually all households, even some high-income families like Connell's.

In fact, families who pay for child care now spend an average of 18.6% of their income on this service, according to a new study by LendingTree. That's steep: The federal government considers child care affordable if families spend no more than 7% of their income on it. Center-based care for one child costs an average of $1,218 per month, approaching the $1,566 average rent for a two-bedroom unit. Parents with two children are paying more for child care than the cost of rent in 91 of the country's 100 largest metropolitan areas, the researchers found.

Child-care costs have been rising about twice as fast as consumer prices overall, even as inflation has cooled. "If you've ever complained about the housing market, or the cost of eggs, or anything like that, child care is worse. Child care has gone up more than all of those things," Connell said in a video on TikTok, where she often discusses issues affecting American families.

"It is becoming harder and harder for anyone who isn't a high-income earner" to support a family, Jacob Channel, chief economist at LendingTree (TREE), told MarketWatch. "Raising a child is really expensive," he said, and while parents are managing to get by, often by making compromises, "we probably will eventually get to a point where people just can't keep up with these costs anymore."

From the archives (May 2024): Child care costs more than a mortgage payment or rent almost everywhere in the U.S.: 'There is no escaping it'

More families are choosing to have one child, and the fertility rate - which since 1971 has generally been too low for the population to replace itself - has consistently been below the replacement rate since 2007, according to the Census Bureau.

"I think finances, specifically the cost of child care and the lack of paid leave, are the two biggest factors why people I talk to are choosing not to have children, or limiting the number of children they have," Connell said.

Only the wealthiest families, or those who earn more than 300% of the poverty level - which amounts to a median income of $166,439 - spent no more than the recommended 7% on child care in 2021, according to the Federal Reserve Bank of Chicago, while all other groups spent a greater share of their income. But it's rare for parents to not be cost burdened by child care these days: Only the top 20% of households in the U.S. earn that much.

Related: Child-care costs keep rising faster than overall prices

As parents now report worse economic well-being than other Americans and concerning levels of stress, both Democratic presidential nominee Kamala Harris and Republican vice-presidential nominee J.D. Vance have proposed increasing the child tax credit, and Harris has suggested capping the amount households pay for child care at 7%, though she did not elaborate on how this might be achieved.

Vance has also suggested that grandparents and other relatives can step in to alleviate child-care costs, a comment that was criticized for being out of touch both because many households don't have that option and because it was seen as perpetuating a system that undervalues caregiving.

"This is potentially an issue that will, and already is in some respects, impacting the broader economy" if people don't have money to spend because of child-care expenses, LendingTree's Channel said. "Frankly, I think that we as a society have a moral obligation to help folks who are really struggling with some of these high costs. That, in my mind, is why the government exists."

See also: A $100,000 salary no longer buys you a middle-class lifestyle. Here's why it costs so much more now.

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-Venessa Wong

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09-25-24 1119ET

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