Many people have been troubled by rising inflation for the majority of the year. The slowing economy has meant a number of changes for consumers, including higher prices for essentials like food, transport, housing, and utility bills.
However, families with young children are acutely aware that the cost of childcare has skyrocketed well beyond the pace of inflation.
A study conducted by the Bank of America Institute has revealed that spending on childcare has surged by 30% since 2019, the year preceding the pandemic.
This is most pronounced among upper-income families, those earning between $100,000 and $250,000 annually, with families in major metropolitan areas like San Francisco and Seattle shouldering the heftiest burden.
Bank of America’s internal data further discloses a consistent increase in the average monthly childcare payments per household over the past three years. As of September, an average family was spending approximately $700 per month on childcare, marking a 32% increase from the 2019 average.
The future could potentially witness even higher childcare costs, given that the Child Care Stabilization program, which provided partial financial support for childcare during the pandemic, expired at the close of September.
A survey by Care.com reveals that among parents who bear the cost of regular childcare, 67% are already allocating 20% or more of their annual household income to childcare services.
The manner in which families are coping with the extra childcare expenses remains unclear, but it is reasonable to assume that they are reducing their expenditures in other areas.
Data from Bank of America appears to support this hypothesis, as it indicates a slight decrease in credit card spending by families with children since May 2023, while it has risen for the remainder of the population.
The authors of the study added: “This could have a meaningful impact on consumers because over 12% of U.S. households pay for childcare on a regular basis, according to the Department of Health & Human Services. Any further increase in prices would disproportionally weigh on families with young children.”