Childcare costs outpace rent, straining U.S. family budgets

The Bank of America Institute reports that U.S. childcare costs rose faster than rent and other essential expenses in September, intensifying pressure on household finances. Nearly 8% of American families now spend more than $2,000 per month on childcare services, including daycare and nanny services. This figure is more than double the share of households that reported spending that amount three years ago, according to the institute's research.

Federal labor data indicates that in September, the cost of daycare and school-related fees increased at a higher rate than rent or medical care when compared to the same period a year earlier. The Bank of America Institute found that families nationwide devoted an average of 8% of their monthly incomes to childcare during that month. Federal guidelines define childcare as affordable only when it consumes no more than 7% of household income.

The financial burden is heavily skewed by income levels. The institute calculated that a family spending $24,000 annually on childcare would need to earn approximately $343,000 to stay within the 7% affordability threshold. Census Bureau data places the median household income in 2025 at $87,460. According to the Bank of America Institute, households in lower and middle income brackets allocate nearly 9% of their annual earnings to childcare, a higher share than the 7.3% reported by higher-income groups.

Economic Policy Institute economist Elise Gould told CBS News that slowing wage growth compounds the impact of these rising costs on many families. Separately, AARP research shows that families are increasingly relying on grandparents, who provide $172 billion per year in direct financial assistance.

Regional variations show where costs are climbing most steeply. The Bank of America Institute identified Nashville, Tennessee; Jacksonville, Florida; and Phoenix, Arizona, as the areas where median childcare costs rose fastest in September compared to the prior year. Taylor Bowley, an economist at the Bank of America Institute, attributed this to an increase in domestic migration to these areas, which is driving up demand for childcare services and putting pressure on prices.

A shortage of workers in the sector also contributes to higher expenses. Employment in the childcare sector fell 0.7% in September compared to one year earlier, making it harder for providers to deliver services. David Tinsley, a senior economist at the Bank of America Institute, told CBS News that falling job growth and creeping price pressures are leading to an availability problem.

The researchers note that a lack of affordable childcare disproportionately affects women's employment opportunities. Data from the American Time Use Survey indicates that women are more likely than men to take on childcare responsibilities. Bowley described childcare as a form of economic enablement alongside being a household expense.