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Average Cost of Child Care

Many new parents realize they should start saving for college as soon as possible. But there’s an expense that can cost as much as college, and starts much sooner: Child care.

Shocking but true: in the U.S, the cost of childcare at a daycare center, full-time, is about as much as annual tuition and fees at a public college in the same state. The day care costs range from a state average of $5,547 for an infant in Alabama to $16,549 for one in Massachusetts. A full-time nanny can cost as much as or more than tuition and fees at an Ivy League institution. Yet unlike college, for which almost all students can get subsidies and loans, child care is usually paid out of parents’ pockets.

  • Average Cost of Child Care
  • How Much Families Pay for Child Care

Average Cost of Child Care

Child care costs can vary widely by type and by geographic location. And families may need different amounts depending on parents’ work schedules and other factors such as the children’s age and time spent in school. When parents can’t care for their children themselves, most patch together a variety of solutions from among the following:

Type of Child Care

Average Cost (full-time annually for an infant)

Extended family members or friends

$0 and up

Care in a day care center

9,991

Care in a home-based day care center

7,431

Nanny

38,813

Babysitters

30,493

Au Pair

18,000

Baby Nurse (helps with newborns, especially overnight)

$11 to $30 per hour (not typically employed on an annual basis)

For families who must pay someone to watch their little ones at least some of the time, the annual average cost of child care in the U.S. is $3,863 for a middle income, two-parent family with an infant. This figure includes a broad array of child care arrangements, ranging from occasional babysitting to nanny care. Single parents with lower incomes pay about $1,948 on average, while high-earning couples pay about $11,000 per year on average. Unsurprisingly, families with more than one child pay higher costs for their care.

Why is child care so expensive?In a word: labor.While technology has helped workers in other industries to be more productive in recent years, it hasn’t changed child care much. We still need human hands to pick up, feed and diaper babies; and human eyes to keep toddlers from eating sand or wandering off.

Child care workers in the U.S. earn relatively low salaries. In 2012, the typical childcare worker earned $9.38 per hour; or $19,510 per year. While the cost of child care is typically born in full by the parents who need the care, low income families are eligible for child care subsidies in many states.

How Much Does Daycare Cost?

The average cost across all states in the U.S. for an infant in full-time childcare is $9,991 annually.

Most states require child care providers to meet certain standards, like specific staff:child ratios. For example, Maryland day care centers must have one staffer for every three infants, while in Georgia that ratio is 1:6. As much as 80% of a daycare center’s expenses cover employee salaries and payroll-related expenditures, like taxes and benefits.

Day care providers might also have to pay for space, equipment, utilities, facilities maintenance, food, insurance, training and background checks for staff and other general safety and administrative costs.

About 35% of children under the age of 5 who need child care go to a daycare center. An additional 8% of young children go to a home-based daycare. In these, caretakers tend to earn less, and may not have benefits like health care or retirement savings plans. They often have lower expenses for things like rent or mortgage, and so cost less for parents.

The average annual cost for an infant in full-time care in a home-based day care center is $7,431.

How Much Does a Nanny Cost?

An in-home babysitter, or nanny, may be a better solution for some families, especially those with multiple children. About 5% of young children with a child care arrangement are cared for in their home by a babysitter or nanny.

The nanny market is competitive, with more experienced workers demanding higher pay. Families also try to woo nannies with good benefits, like health insurance, paid vacation and guaranteed pay on days or weeks when she isn’t needed, like when the family goes on vacation or a grandparent is visiting.

The average salary for a nanny is $18.66 per hour (that’s $38,813 annually for 40-hour weeks), according to a 2014 survey of mostly U.S.-based nannies done by the International Nanny Association. It ranges from an average of $14.68 per hour for a nanny with less than two years of experience, to an average of $21.02 per hour on average for those with more than 10 years of experience. About 68% of nannies are compensated for overtime at time and a half. Also, 60% of nannies receive an annual bonus from their employer. More than half also get paid vacation and paid holidays, as well as guaranteed pay. Only 22% of nannies get help to pay their health insurance costs.

U.S. families who pay a nanny (or any other domestic help) more than $1,900 per year are responsible for paying social security and Medicare taxes of 15.3% of the cash wages, according to the IRS. This amount can be split between the employer and the employee. If your child’s caregiver earns more than $1,000 from you in any one quarter, you must also pay federal unemployment tax of 6% on the first $7,000 of their earnings. And depending on your state, you might also have to pay state unemployment taxes, workers’ compensation insurance and disability benefits.

How Much to Pay a Babysitter

Parents who don’t work full-time, or who have non-traditional schedules, can sometimes provide more child care themselves and use babysitters to fill in the gaps. Parents in U.S. cities generally pay babysitters between $10 and $20 per hour. The rate is highest in expensive cities like San Francisco. The average cost of a babysitter in the U.S. is $14.66 per hour, according to SitterCity. Using babysitters to care for an infant full-time would cost about $30,493 on average.

Families with more children typically pay more per hour. And nannies or sitters with special qualifications, like a second language, many years of experience, CPR or First Aid certification, or who do some housework, such as laundry, might also charge more for their services. Most families provide food for the caregiver when she’s in the home. When she must travel to or from the home late at night, many families offer a ride or taxi fare.

Babysitter wages are also subject to the tax laws for domestic employees as outlined above.

The Cost of a Baby Nurse

New parents without access to maternity or paternity leave benefits might have to go back to work when their newborn is still waking up every three hours. Others, with cash to spare, might also appreciate the assistance of an experienced newborn caregiver. Enter the baby nurse, who can come to your home for 12-hour shifts, or even round-the-clock help during those early weeks of your baby’s life. Some stay for just a week or two, others for up to 6 weeks or longer.

New mothers report paying a baby nurse, or night nurse, rates that start at about $11 per hour in lower cost of living parts of the U.S. Baby nurses hired through agencies tend to cost more. In some expensive cities, families pay up to $30 per hour.

Cost of an Au Pair

If you have a spare room in your home for a live-in caregiver for your child, you might consider hosting an au pair. Several agencies can help you connect with a young person from another country as well as coordinate their visa, travel, insurance and orientation. Several of these agencies include Cultural Care Au Pair and Au Pair in America, to name a few. The average cost for an au pair for a full year is about $18,000, plus room and board. In return for this expense, you get about 45 hours of childcare per week. It breaks down to less than $8 per hour, alongside your extra costs for groceries and other family activities, like going out to a restaurant or traveling for a ski trip or summer vacation, since au pairs are generally treated as a member of the family.

How Much Families Pay for Child Care

The percentage of income paid for childcare by a family with a working mother has ranged between 6% - 8% in the U.S. since 1985. In 2011, such families paid an average of 7.2% of their income. These families include many who only require part-time or even occasional paid child care.

Those who require full-time child care tend to pay a much larger share of their income for the service. The U.S. Department of Health and Human Services considers child care to be affordable when it is 10% or less of a family’s income. However, in 38 states, the average annual cost of full-time care for an infant at a daycare center is above this threshold.

The cost of full-time child care can be a huge burden for low income and single parent families, as well as those who live in high-cost-of-living parts of the country. Throughout the country, the cost of full-time care at a daycare center eats up 40% of the state median income for single mothers. And in New York State, where child care is least affordable as a percentage of income, the typical married couple must pay 16% of their income (on average $14,500) for full-time care of an infant at a daycare center.

The IRS allows families a tax credit for up to 35% of qualifying expenses up to $3,000 for one child under the age of 13, and up to $6,000 for two or more children. This translates to a maximum of $1,050 in tax savings for one child (i.e. 35% of $3,000) or $2,100 for two children. The actual credit depends on your adjusted gross income; and decreases to 20% of allowable expenses for parents with an AGI of more than $43,000 per year.

The cost of child care may be as challenging to many families as sleep deprivation is during their child’s early years. Fortunately, it’s necessary for a limited time, until the children go to school and become more self-sufficient. If it allows both parents to work, they can reap benefits both in terms of salary and also in terms of experience which might pay off in higher wages down the line.

Source:Child Care Aware® of America, Parents and the High Cost of Child Care: https://www.ncsl.org/documents/cyf/2014_Parents_and_the_High_Cost_of_Child_Care.pdf

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