To Her Credit offers targeted advice about personal finance based on unique challenges faced by women. It is authored by women with different financial backgrounds, dedicated to encouraging empowerment through financial literacy.
Managing child care and figuring out how to pay for it are vexing issues for American parents – particularly, for mothers. Women are more likely than men to cut back at work, take days off or stop working altogether, because they have children under 18.
A 2018 study by the Center for American Progress found mothers were 40 percent more likely than fathers to report that child care issues had impacted their careers. This may be because it interrupts their work lives: 39 percent of mothers said they’d taken a significant amount of time off to care for a child or family member, while 27 percent quit work altogether, according to a 2013 Pew Research study. The same study found that only 24 percent of men reported taking significant time off, and only 10 percent left their job in order to care for a loved one.
One reason child care impacts work? It is so expensive. On average, U.S. families who pay for child care spend 8.8 percent of their income on it, according to a study from the University of New Hampshire. But that number goes up in the Northeast (more than a third of Maryland families report that child care costs are a financial burden), and for poor families, who on average spend nearly 20 percent of their income on child care.
Understanding and managing child care costs
Short term: upfront costs
Christine Michel Carter pays $1,060 a month for half-day child care for her four-year-old. “Actually, that’s a steal,” says Michel, a marketing strategist in Baltimore. It’s also by far her biggest pretax expense and, on a yearly basis, more than twice the $5,000 she’s allowed to put aside in her pretax, flexible spending account for dependent care.
Carter is not alone. According to a 2015 study by the Economic Policy Institute, child care costs more than rent in most areas of the country, and infant care is more expensive than in-state college tuition at public universities in 33 states and the District of Columbia.
The burden is particularly heavy for low-income workers. The EPI calculated that a minimum-wage worker in Hawaii, working 40 hours a week, would have to devote her entire salary from January to September to pay for typical infant child care costs in that state.
Daycare and preschool expenses were a “very significant financial strain” for 28 percent of the 1,027 people surveyed by the New York Times in August, 2019. Another 31 percent reported they were a “somewhat significant financial strain” and 20 percent said they’d gone into debt to pay for child care.
Short term: hidden costs
The preschool bill is only the beginning of expenses associated with children and child care. A father who had previously taken the bus or the subway to work now needs a car to drop off children whose day care facility isn’t on the public transit route. A mom who bought herself a daily salad from the deli around the corner from the office now spends time and money to pack elaborate lunches and snacks for children. Or, if she has an at-home caregiver, she’s providing extra food for them.
There’s illness and other emergencies. A one-year-old with a fever can’t go to day care. A caregiver (nanny, babysitter, beloved aunt helping out) whose car breaks down or whose own child gets ill can’t make it into work.
Many workers, particularly those in low-paying jobs, lose pay – or even their jobs – when they must stay home to care for a child. “There is a huge penalty, when they are unable to have care for their children,” said Michelle McCready, previously a policy analyst at Child Care Aware of America, a nonprofit advocacy group based in Arlington, VA.
Those privileged enough to have sick days and the ability to afford a nanny can still run into unexpected child care spending. Edelstein had to hire a backup babysitter when her children’s nanny got hit by a car. At the same time, she continued paying her nanny’s salary. “For a good month and a half, I was paying two people,” she said.
Then there’s the added cost of having a child – it’s not uncommon for parents to go into debt to pay for child care and other child-related expenses. In a recent report, Malik found that credit card debt increases just before the birth of a baby, as parents purchase new furniture, strollers and other equipment; it then declines over the next year as parents pay off the debt.
U.S. Census Bureau data shows families increasing spending on housing and borrowing more for larger vehicles as well as private, unsecured loans after the birth of a baby – moves that hit African-American households particularly hard, Malik found. Decades of institutional and structural racism have left black families in a precarious financial position that the expenses associated with parenthood only intensifies, according to the CAP study.
Long term: child care costs and the “motherhood penalty.”
When the day care bill hit $3,000 a month, Shannon Cairns knew something had to give. She and her husband, Daniel, own a podiatry practice together near their home in Watauga, a suburb of Fort Worth, Texas. Together they have nearly $400,000 in student loan debt. They also have three children under age 7.
After some budget pondering, the Cairns decided to split their time: Shannon would see patients two days a week, then spend three days at home. Her husband does the reverse. This isn’t the best way to grow the practice, she said, “but we couldn’t justify [having both of us at work all week] with the child care costs.”
Childcare impacts not only current family budgets but future wealth. A calculator created by the Center for American Progress allows parents to input a few facts about themselves and their time off work – then it calculates the financial loss.
For instance: a woman who starts working full-time at age 24 and who is making $60,000 a year stops working at age 31 to take care of a child. If she returns to the workforce five years later, she will sustain a lifetime income loss of $803,000, factoring in lost wage growth, lost wages and lost retirement benefits and assets. If she stays away for 10 years, that number rises to nearly $1.4 million; 15 years and it’s $1.86 million.
“The motherhood penalty is real,” McCready said. “It contributes to so many socio-economic divides.”
There’s a companion to that penalty, Malik said – the fatherhood bonus. In the year after having a baby, a father’s income rose on average by 7 percent, according to the CAP study, while mothers’ incomes dropped by 50 percent, then settled in at 80-85 percent of where they were a year before the baby was born. “Even when you control for a lot of different factors, that penalty remains,” he said. “We have these stubborn cultural norms about who should do the caregiving.”
Ways to ease the child care burden
With child care, generally speaking, the more you spend, the higher the quality of care you can purchase for your child. Providing the care yourself, by cutting back on work or dropping out of the workforce, may save money in the short term, but has long-term financial consequences.
Nevertheless, there are steps you can take to reduce the financial toll of child care.
When looking for child care providers, connect with your local Child Care Resource and Referral agency. These are free services, provided by nonprofit agencies, that help connect families with child care that is both nearby and within budget.
Additionally, there are a few options the federal government offers families:
- For the very poorest, there are child care subsidies. However, said Malik, the paperwork to get a subsidy is involved and time-consuming, the supply of subsidies is limited, and the reimbursement is low. Only 1 in 6 people who are eligible actually uses the subsidies, he said.
- The child and dependent care tax credit reimburses parents at tax time for some child care costs. A parent with one child can receive anywhere from 20 to 35 percent of allowable expenses on up to $3,000 in annual expenses; for two or more children, that number rises to $6,000.
- If your employer offers it, you can sign up for a flexible spending account for dependent care. This allows you to put aside pretax money, up to $5,000 each year (or $2,500 each for married spouses filing separately), into an account to pay for childcare-related expenses.
The United States ranks near the bottom of advanced economies for spending on child care – less than 0.5 percent of GDP, compared to higher than 1 percent in France and the Nordic countries. Many, many nations offer more in the way of governmental child care assistance than does the United States, Malik said.
“The problem is systemic and the solution is beyond any one mother or father’s ability,” Edelstein said. “Don’t blame parents. They’ve been put into an impossible situation and they are doing the best they can.”
That leaves one more thing frustrated parents can do: advocate for change. “Join the movement,” McCready said. “Leverage your voice. Leverage your story.”
Learn more about financial issues affecting women’s lives
As we continue the To Her Credit series, we’re working to feature financial struggles faced by all kinds of women and address their specific needs. From planning for child care costs to fighting the gender pay gap, we’ll offer targeted financial advice for women.
If you have a story to share about managing the costs of child care or any other financial problems facing women, reach out to us at email@example.com.