Smart Money Podcast: Nerdy Deep Dive: Why Is Child Care So Expensive?

Profile photo of Sean Pyles
Written by Sean Pyles
Senior Writer
Profile photo of Laura McMullen
Edited by Laura McMullen
Assistant Assigning Editor
Fact Checked
Profile photo of Amanda Barroso
Co-written by Amanda Barroso
Lead Writer
Profile photo of Alieza Durana
Co-written by Alieza Durana
Lead Writer

Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

This week’s episode is a Nerdy deep dive into the cost of child care.

Check out this episode on any of these platforms:

Track your money with NerdWallet
Skip the bank apps and see all your accounts in one place.

Our take

In this two-part Nerdy deep dive, we go behind the scenes to untangle one of the largest budget items for many families: child care costs. For the millions of Americans who are parents to young children, child care costs are pushing their budgets to the brink, and they’re left with little support.

Ages 0 to 5 represent a “no man’s land” of child care, where parents — who are increasingly working outside the home out of economic necessity — are left to cobble together care they can afford that aligns with their work schedules. In October 2021, The New York Times reported that Americans paid an average of $1,100 a month in child care, and costs are only on the rise. For many parents, child care expenses are second only to housing costs.

In Part 1, we hear from listeners across the country and speak with child care reporters and policy experts who explain the broken child care system in the U.S. Between soaring costs, razor-thin margins for child care providers and poverty wages for workers, the U.S. child care system lags far behind other countries with similar economies.

We learn more about how the pandemic has only exacerbated the financial stress for parents, especially mothers, many of whom were forced out of their jobs to take over child care and virtual schooling.

As the experts note, thinking through solutions to the child care crisis in the U.S. is not simply an exercise in economic bottom lines or business strategy. It’s also a chance to reflect and revise our social values around how we support families and children.

To learn more about child care history and policy, check out these resources from the experts highlighted in this episode:

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

Episode transcript

Sean Pyles: Welcome to the NerdWallet Smart Money podcast. I'm Sean Pyles.

This episode, two NerdWallet writers — Amanda Barroso and Alieza Durana — are doing a Nerdy deep dive into the cost of child care: why it's so expensive, and what you can do about it. Hey, you two.

Alieza Durana: Hello, Sean.

Amanda Barroso: Hello, Sean.

Sean Pyles: You guys are in sync. I love it. Can you guys both give us a brief introduction, so our listeners can get to know you and understand whose voice is whose?

Amanda Barroso: Sure. I'm Amanda Barroso, and I'm a personal finance writer here at NerdWallet.

A little about my background and what brought me to this topic: I have a Ph.D. in women's and gender studies and spent a few years in the policy and think-tank worlds, writing about a lot of the issues that are facing women across the course of their lifetimes.

But maybe perhaps most importantly, I'm also a mother to a toddler. And over the past two years, I've had to navigate the vortex of child care costs and pandemic parenting.

Alieza Durana: And I'm Alieza Durana. I'm an investing strategy writer at NerdWallet.

But before I became a Nerd, I worked as a journalist covering work, housing and social policy, including child care and paid family leave.

And in 2016, I co-authored The Care Report with one of our interviewees, Brigid Schulte, which ran in The Atlantic. We evaluated the cost, quality and availability of child care and found parents were making trade-offs in every U.S. state, while caregivers make poverty wages.

And now Amanda and I have teamed up to revisit and unravel the cost of child care and how it's affecting family budgets.

Sean Pyles: Great. And ahead of this series, we did a callout for stories from our listeners about how child care costs impact their budgets. And let's listen to one of the responses that we got.

Listener 1: Hi, NerdWallet, Stacy from Denver calling about day care. We were married for 14 years before we finally felt ready financially to have a baby, especially in Denver, where day care costs are really expensive.

Currently we're paying $450 a week for one child, and I'm due to give birth tomorrow with our second, so the amount will double. But all of our regular income goes towards child care these days and our mortgage.

It's been rough but definitely worth it to have our little kids. Thanks.

Sean Pyles: Amanda, can you give us a little bit of context to help us better understand Stacy's story?

Amanda Barroso: Sure, Sean. Last October, The New York Times reported that Americans paid an average of $1,100 a month in child care costs. The report also found that countries considered, quote-unquote “rich” dedicate $14,000 a year to toddler care, while the U.S. spends a meager $500.

So we hear from Stacy here, and she's paying even more than those New York Times estimates. At $450 a week, her family is paying $1,800 a month in child care, which will double to $3,600 a month when her second child is born.

So just let that sink in. Unfortunately, this is the reality for many families. Parents work outside the home and need child care, and the costs are really steep.

So, out of curiosity, I went to Child Care Aware of America — which is a nonprofit that works to connect families with child care across the country — to see what the annual cost of center-based infant care is in Colorado, where Stacy lives. Looking at the map, showing costs state by state, I can see that in Colorado, the annual price for center-based infant care is $15,600 and 16% of the median household income.

Sean Pyles: Jeez.

Amanda Barroso: But, if my math is correct, Stacy will be paying nearly three times that once her second child arrives. These are in 2020 dollars, and we know that costs are only on the rise.

Sean Pyles: Right.

Alieza Durana: And according to the Department of Health and Human Services, contributing more than 7% of your family income to child care is considered unaffordable.

But for folks in Colorado, like Stacy, who are allocating more than double what Health and Human Services suggests, sounds like a nightmare.

Sean Pyles: Yeah. And a lot of families across the country are in a similar position.

So before I pass things off to you two, can you let us know what our listeners can expect from this series?

Amanda Barroso: Absolutely. So in this two-part Nerdy deep dive, we're going behind the scenes to disentangle one of the largest budgetary items for many families across the U.S.

By the end of the series, you will be more aware of the factors driving this expensive child care system, and parents will have a deeper understanding of the supports they can take advantage of, while the fight for more widespread policy change continues on.

Alieza Durana: We'll start by showing you how the U.S. child care system came to be so broken and help you understand where your child care tuition is going each month.

Sean Pyles: Great. Well, I'll let you two take it from here.

Alieza Durana: Before we get started, I want to note we'll be mentioning different types of child care in today's episodes. Child care comes in many forms. It could be Mom, Dad, Auntie, Grandpa or a neighbor. It could also take the form of a nanny, in-home day care or child care center.

Although a lot of our examples are from child care centers, that's not to say that families using other types of care aren't impacted by similar challenges. Most of this episode will focus on explaining the high cost of child care you may be juggling.

In episode 2, we discuss some of the tax, employer and other benefits you may be able to access to reduce costs — including the child tax credit.

Amanda Barroso: So the first thing parents need to know is that the ages 0 to 5 represent a sort of no man's land when it comes to child care. In other words, parents are expected to piecemeal a child care system together using whatever resources they have.

Sometimes that means paying for full-time child care, or relying on family and friends, or finding half-day programs that allow for part-time work — or some kind of combination of these options.

Alieza Durana: To understand what's happening with child care between those ages of 0 and 5, we talked with Elliot Haspel. Elliot is the program officer for education policy and research at the Robins Foundation, which funds early childhood education programs in Richmond, Virginia.

Elliot Haspel: There's this interesting phenomenon where we treat the first five years of life very much as parents' personal responsibility. Sort of like, "good luck."

And then from the time the child hits school age until the time they're graduating high school, then we're providing — at least for nine months of the year and for seven or eight hours a day — free care, free education for those children.

Amanda Barroso: So what Elliot is getting at is that there's this void for young children where subsidized care and education systems don't kick in until kindergarten.

Or, I guess maybe if you're lucky and live in a state with universal pre-K, you get some support when your kid turns four.

Alieza Durana: By comparison, we pay for K-12 education collectively but leave parents in the lurch for ages 0 to 5.

Amanda Barroso: Another pressure parents face is just simply tracking down affordable and high quality care. And some of this really depends on where you live.

Let's hear from Elliot again and hear what he has to say about a phenomenon called child care deserts.

Elliot Haspel: Parents face a very constrained choice set that is defined by what's available in the area. Much of the country is what's considered a child care desert. There just aren't slots available, particularly for infants and for younger toddlers, for what they can afford. The financial assistance is pretty limited.

And so it can often be sort of an anchor around social mobility, where a family is not able to purchase a house yet; they have to stay renting because they need to afford child care. They have to defer maintenance on a car, because they have to afford child care. And that becomes a much bigger expense down the road.

Alieza Durana: So beyond finding someplace safe where your baby can grow and learn, parents face budget pressures and limited child care slots.

And to make matters worse, imagine you don't work a traditional 9-to-5 job, which is how child care centers traditionally structure their hours.

We heard from Leslie, a parent who decided to move her child from pre-K to public school in Florida next year, and is still trying to fill in child care gaps.

Listener 2: We can only afford to place our kid in child care part time. We relied on grandparents to fill the gaps until COVID hit. We pulled our kiddo out of child care and — because my spouse worked out in the world and I could work from home as an educator — I was saddled with double duty: squeezing in my grading before the kiddo woke up and letting kiddo have too much screen time so I could teach and pay bills.

It was terrifying to make the decision to send our child back to school in August, because they're high risk for COVID complications, and vaccinations were not available for their age yet. And, being in Florida, that also meant no mask mandate. But I'd started a new job outside of academia, and I couldn't watch my child and work at the same time.

We're moving our kid to public school next year, which will help us save a lot of money, but we still need to pay for before and aftercare. And summer, well, nothing's open the hours we need. Grandparents aren't available to fill in the gaps.

In short, we just have no idea how we're going to do this. The system's not set up to support families of single parents or where both parents work, and especially if there aren't any other caregivers available to drop off, pick up or watch the kiddos until parents are available. Frankly, we just can't afford to have any more kids, so we're not going to.

Amanda Barroso: Leslie's story highlights a real problem parents face: finding care that fills the gaps between school hours and work hours.

Let's hear more about this from Dr. Shengwei Sun, manager of child care research at the National Women's Law Center in Washington, D.C.

Shengwei Sun: Families have different needs. The child care centers that are operating on a 9-to-5 schedule doesn't meet the need for parents who have to work irregular hours or doesn't work 9 to 5 or five days a week. So there has been less of flexibility in more formal programs.

Amanda Barroso: So clearly there are challenges with simply finding child care in your area that you can afford and that works with your schedule.

I experienced some of this myself when I was pregnant with my daughter back in 2019. At the time, my husband and I were living in the D.C. area and literally had no clue where to start when it came to deciding what to do for child care. Luckily we had some good friends who had already had kids, and they shared their experiences with various child care centers in the area with us. And they were also really upfront about the cost, which I appreciated.

The one thing that really shocked me was their just absolute insistence that I get my name on the list during my first trimester, because the area was just so competitive — sort of the opposite, I guess, of the child care deserts that Elliot was telling us about earlier.

I can remember feeling really panicked, and I was madly scheduling a bunch of tours in a two-week timespan. My husband's head was spinning around. And ultimately we found a place that we could sort of afford. But it was close by, it was walkable, and they had a spot for my daughter when my maternity leave was over.

And for transparency, we paid $1,360 a month for child care, and that included snacks and diapers. And truthfully, we felt like we had won the lottery. But now that I look back on it, it's like, "Wow, that was a really stressful and very rushed initiation into the world of child care."

Alieza Durana: Wow, Amanda, my jaw dropped. $1,360 was more than the cost of my rent in Washington, D.C. And your experience really highlights the bind parents are in. Child care anywhere is expensive and hard to find or competitive to get into.

But don't take our word for it. Check out this clip from another listener.

Listener 3: Hi, my name is Eila, and I have two kids: an almost-4-year-old and a 1-year-old. And we pay currently $542 per week for the two kids to go to day care. My almost-4-year-old goes five days a week. My 1-year-old goes three days a week.

And starting in September, that will go up $60 — bringing the total to $602 a week — when my 1-year-old goes to five days a week because it's just not possible to keep him home anymore. And that means that our day care costs will hit just over a third of our income.

And our center is trying really hard to do a really good job, but I know that they are struggling with staffing issues. I know that they're still not making as much money as they should be, given this important work that they do. At the same time, even though I wish I could help them pay their staff more, I don't know how much more I can take on. We've had 10% increases in costs every year for the last few years, and it's really breaking the bank.

I know that in other places care is much more expensive, but paying over a third of our salaries for not even the best care possible in the area is hard to swallow. So I know that we're relatively lucky, but I feel like this is more money than it should be.

And if day care wasn't so expensive, I think I would absolutely be having a third child, and having the cost of care being the only thing that's holding me back is frustrating. Thank you.

Amanda Barroso: Hearing stories from parents from all over the country who have had to grapple with child care costs is really powerful. Parents are clearly struggling to pay for child care, and it's a really prohibitive factor when it comes to their personal finances.

Alieza, you've worked on this issue for a while. I'd love to hear from you about why child care is so expensive. When I write that check every month, where is that money going?

Alieza Durana: So some of the costs go toward keeping facilities up and running. Think: the rent, utilities, etc. But most of it really goes to the cost of labor, especially keeping adult and child ratios low in your child's facility.

So making sure babies and their caregivers have meaningful one-on-one time is not only important for child safety and development, but also to comply with safety regulations.

Let's get some more insight from Elliot about the child development aspect.

Elliot Haspel: What we know about young children is that they thrive, they grow, they learn, their brain develops on the basis of their relationship with their caregiver. That doesn't matter who that person is, but to have that warm, attentive relationship, for that child to know, "if I have a need, that need is going to be met."

You can think of this kind of like a tennis match, so that the baby points at a dog and babbles and then the caregiver says, "Oh, you're looking at the dog," right? That helps the child make neural connections.

If you have too many children per caregiver, because there are also just — anyone who is a parent who's listening to this, and I'm sure you both know, right? — sometimes there’s just physical needs. The child's diaper needs to be changed. The child fell down and hurt her knee, needs to be tended to. If there are too many children, it becomes nigh impossible for the caregiver to provide that level of attention and that level of interaction that the children need.

Many of the child care workers themselves are stressed out about finding child care for their own children, which is — again — not what you want if you want to have a system that's promoting child development, healthy relationships across the board.

Amanda Barroso: So let me get this straight. We need well trained and supported caregivers, not only to keep ratios low, but also to form developmentally healthy relationships with the children in their care, right? But they're making poverty wages?

Let's hear from Shengwei, who can help break down this disparity between pricey tuition and poverty wages a bit more.

Shengwei Sun: There's also the argument that child care workers earning poverty level wages are actually subsidizing the public with their low wages.

Before the pandemic, child care was already a broken system, and that's our consensus. So families, for example, on average spend about 13% of their income on child care for young kids, while child care workers have been earning really poverty level wages, which barely increased over the past two decades.

Alieza Durana: OK, child care is expensive to provide because of the important interactions between baby and caregiver, but has it always been so expensive?

The answer is no, but probably not why you'd assume. Child care has actually shifted many times across U.S. history.

Amanda Barroso: How so?

Alieza Durana: Before the U.S. developed factories in the 1820s, child care was often a shared communal activity, especially since work and care took place in the same space — like a farm or shop — where adults of all genders took care of little ones.

Really, only the wealthy and white elite had child care provided by servants or enslaved women of color. And as the U.S. industrialized, many people left home for the first time to go to work in places where they couldn't safely take their children.

Amanda Barroso: I'm thinking back, I can't imagine wrangling my toddler while trying to do manual labor that required any sort of focus or precision, much less around heavy machinery. So how did those families make it work?

Alieza Durana: Well, workers mobilized, actually. In response, Henry Ford began piloting what's coined as a family wage. He offered to double the minimum wage to encourage men to work and women to stay at home.

This encouraged what we think of today as a nuclear heterosexual family model, with a “Leave It to Beaver” style mom and dad.

Amanda Barroso: OK, so let me ask you this: Why didn't this model work out? Why isn't it common to see employers paying a family wage today?

Alieza Durana: The family wage was a dream that really never came to fruition on a large scale. It was only briefly accessible at a specific time in history for specific types of workers, most of whom were white men.

While Ford was the main game in Detroit, especially during the early 1900s, he competed for scarce workers. But as other employers emerged and workers migrated to new industrial jobs, the problem of needing to give workers something special disappeared.

Amanda Barroso: So in a way, the family wage is a kind of cultural hangover. Families can survive with one income and one caregiver, but this image of family life only existed for just a brief window in time. And even still, only for a pretty small slice of Americans.

Not to mention the damage that it did to women's future employment prospects, because it basically put them in a financially dependent position to their husbands or their fathers.

But in the 20th century, a couple things happened, actually. A growing economy pulled more people into the workforce. And at that same time, the women's movement fought for women's rights to work if they wanted to in jobs that weren't really limited.

So it used to be that women would basically be a secretary, a nurse or a teacher. And the women's movement at the time really tried to expand a vision of what kind of work women could do.

And that sort of leaves us to where we are today. If the adults are working, who is taking care of the kids?

Alieza Durana: Exactly. And on top of that, families of color and single moms didn't get to benefit from early U.S. welfare policies — like the GI Bill or homeownership — which allowed for white male-led families to build wealth and stability. Ultimately, rising costs and decades of stagnant wages drove folks into the workforce.

In fact, families where women are the primary earners is on the rise, and we're not just talking about single mothers here. A 2020 study by Glass, Raley and Pepin — who are scholars in the field of sociology from UT Austin and the University of Buffalo at SUNY — revealed a spike in the share of married women who are primary earners, from 15% in the year 2000 to 40% in the year 2017.

Amanda Barroso: Wow, OK. So it sounds like what we've witnessed over the years is a fairly dramatic shift in the role of mothers in American family life, in part as a response to a lot of these economic factors that you were pointing out.

So speaking of economic factors, this April, the Bureau of Labor statistics reported that inflation was up 8.3% from 2021, which is a 40-year high.

I know I've personally felt it going to the store, that kind of thing. And people are paying more for everything, from groceries to housing to gas. And so for many families, a single income just isn't enough to cover the cost of their needs today.

Alieza Durana: These kinds of financial pressures can be really tough on parents emotionally, too. Let's see what Elliot has to say about the kinds of tough decisions parents have to make.

Elliot Haspel: Parents don't have a full suite of choices about what to do around child care. And as a result, they're often forced into care-work situations that's not what is their ideal and is not what they think works best for them.

And that has all sorts of implications for a marriage or a partnering relationship, for stress levels for parents, and that all tracks right down into child development.

Much too often, this ends up disproportionately falling on the mother. Should the mother go back to work when essentially 90% to 100% of her salary would be basically eaten up with child care costs? And so that's not a true choice.

Amanda Barroso: The pandemic amplified some of these tough choices for parents, and especially for mothers. We know that when the pandemic hit in March 2020, women left the workforce in droves when money got tight and child care was literally unavailable because of the lockdowns.

Women were forced to leave their jobs, because they had to take over child care. And not only that, but some of them had to do virtual schooling as well. And they still haven't recovered those losses.

Let's hear from Brigid Schulte — longtime journalist, author and director of New America's Better Life Lab — about how parents are doing more than two years after the pandemic uprooted American life.

Brigid Schulte: You can certainly talk to people or look at any survey out there. Parents are — they're at the end of their rope. The levels of burnout and stress are just at astronomical levels, particularly for mothers.

Schools were closed. Schools went online. Child care centers shut down. And a number of women, they were forced out of the workforce because they couldn't find child care.

So here we are, two years after the pandemic started, and we're still missing nearly a million women who haven't returned or haven't been able to return to work. And not everybody even had that choice to be forced out, so to speak. We have the largest share of children in the world who are being raised in single-parent families, so there's no options there.

So families have really born the brunt of a lot of the pandemic disruptions. And I think that if people didn't know or weren't paying attention before about how the child care system is broken, I think there's a real recognition now that it is. What I worry about is that we're not going to act on this crisis.

Alieza Durana: Parental burnout is certainly a very real issue. In fact, a new report from researchers at Ohio State University found that two-thirds of working parents show symptoms of burnout brought on by stressors of pandemic parenting.

Some of the symptoms of burnout listed in the report are exhaustion, irritability and feeling emotionally detached or overwhelmed with parenting tasks.

Amanda Barroso: That list hits a little bit close to home, and I can certainly admit to feeling those things at one point or another over the past few years. I think early on especially, one thing that added to my frustration was paying for child care that me and my family weren't actually utilizing.

In the first few months of the pandemic, we continued to pay full tuition, because we didn't know how long the pandemic would last, which at this point seems pretty laughable, right? We also wanted to make sure that the center was able to function and pay its rent, pay its workers, even while it was closed and everyone was on lockdown.

So I guess in other words, we just wanted to make sure that our care existed when the pandemic was over. We wanted it to still be standing, and we still wanted to be able to use it when things returned to normal.

Alieza Durana: The pandemic revealed the fragility of child care centers. They were already operating on razor-thin margins, like you described, Amanda. And when parents pulled their children out of concern for their health and safety, many centers did have to close.

This meant that child care workers who were already underpaid suddenly lost their jobs. According to the Berkeley Center for the Study of Child Care Employment, the child care workforce is 11% smaller than at the outset of the pandemic, and wages remain low. The median wage of child care workers is just $13.22 an hour.

Shengwei told us more.

Shengwei Sun: And now the pandemic is pushing the system to a breaking point and amplifying preexisting inequalities. Providers are considering quitting or closing down their business in the next year. Over half of minority-owned centers are in danger of shutting down.

And this also means that centers that serve working class families or families in rural areas and low income families are especially in danger of closing because they can't raise the costs.

Amanda Barroso: The pandemic certainly amplified what was already broken about the child care system for both providers and parents. And I think the end result is just a lot of financial stress for both parties.

So now I'd like to return to the stories of parents that we featured on this episode. These stories come from all over the country, and they really highlight the exorbitant cost of child care and the ripple effect that it has for other areas of their lives.

Alieza Durana: And to the parents who are listening today, we want you to know this: Your instinct might be to feel like you're not being frugal enough or doing all the things when it comes to managing your finances.

But the truth is that the child care crisis in America is a structural problem, forcing many parents to make really difficult decisions in order to make it work financially. Because in reality, there is no actual choice. No amount of personal finance hacks will fix this problem.

Amanda Barroso: That's all we have for this episode, but please stay tuned for Part 2, where we'll get into what tax, employer and other benefits may be available to parents to help defray some of these child care costs and create a little breathing room in your budgets.

If you have questions about managing the cost of child care, reach out to us on the Nerd hotline by calling 901-730-6373. That's 901-730-NERD. Or if you want, email us at [email protected].

Alieza Durana: Also, visit for more info on this episode. And remember to follow, rate and review us wherever you're getting this podcast.

And here's our brief disclaimer, thoughtfully crafted by NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This Nerdy info is provided for general, educational and entertainment purposes and may not apply to your specific circumstances.

Amanda Barroso: And with that said, until next time, turn to the Nerds.