How Much It Actually Costs To Raise Kids In The U.S.

Summary

The video script discusses the soaring costs of raising children in the US, with daycare expenses often exceeding college tuition. It highlights the financial struggles faced by American families, including the middle class, and the inadequacy of current policies to support them. The script calls for comprehensive policies, such as subsidized childcare and paid family leave, to alleviate the burden and argues that investing in children benefits society and the economy at large.

Takeaways

• 💰 The cost of raising a child in the US is significantly high, with daycare expenses sometimes exceeding college tuition costs.
• 🏢 The free market has failed to provide affordable child care, making it a sector in need of policy intervention.
• 👶 Daycare costs are a major burden for families, especially in areas like the Bay Area, where they can equal or exceed rent payments.
• 👪 Many American families, including middle-class ones, are struggling financially and have stopped saving due to high child care costs.
• 🤔 The lack of comprehensive policies in the US has led to a reliance on piecemeal programs to support families.
• 🇺🇸 The US has been historically reluctant to implement family policies, which has contributed to the high cost of raising children.
• 💼 The social safety net needs improvement, and reducing the cost of raising children is beneficial both morally and economically.
• 📈 Child care costs have risen faster than inflation, indicating a growing financial strain on families.
• 👩‍👧‍👦 The Child Tax Credit has been an effective policy in reducing the tax burden on families and alleviating child poverty, but it has its limitations.
• 🌐 The US is unique among OECD countries for not having a federal paid leave program, leaving many families without support during critical times.
• 👶🏼👧🏼 Subsidized child care and paid family leave are advocated by experts as key policies to support families and improve child care affordability.

Q & A

What is the primary concern regarding raising a child in the US according to the transcript?

The primary concern is the high cost of raising a child in the US, which is even more expensive than expected, and the lack of comprehensive policies to support families financially.

Why is child care considered more expensive than higher education in some parts of the US?

The transcript mentions that sending an infant to daycare can be more expensive than in-state public tuition for college, highlighting the high cost of child care compared to higher education.

How did the speaker's personal experience with child care costs affect their financial situation?

The speaker's personal experience with child care costs led to living paycheck to paycheck, stopping savings altogether, and struggling to pay for everyday expenses including rent and child care.

What is the impact of the high cost of raising children on American families according to the transcript?

The high cost of raising children affects families across the economic spectrum, with more than 12.5 million children living in poverty and even middle-class families struggling to pay for everyday expenses.

What was the average family's expenditure on child care according to the September 2021 Treasury Department report?

The report indicated that the average family with at least one child under the age of five spends around 13% of the family's income on child care.

How does the cost of child care compare to other household expenses?

The cost of child care is more than what the average household spends on groceries and is nearly double what the government considers affordable for low-income families.

What was the estimated cost to raise a child from birth through age 17 according to the 2015 Department of Agriculture report?

The 2015 report estimated that for a middle-income household with two parents and two children, it would cost more than $233,600 to raise a child, which translates to almost $286,000 in 2022 with inflation.

How did the COVID-19 pandemic affect child care costs and family expenses?

The pandemic exacerbated the situation, with child care centers and school closures forcing parents to pay for child care in unprecedented ways, and child care prices outpacing annual inflation.

What is the Child Tax Credit and how was it expanded during the pandemic?

The Child Tax Credit allows parents to deduct a certain amount from their taxes at the end of each year, depending on factors like household income and the age of the children. It was temporarily expanded during the pandemic to provide a higher credit amount and monthly payments.

What are the policy recommendations mentioned in the transcript to help families with child care costs?

The transcript mentions subsidized child care, paid family leave, and an expanded Child Tax Credit as policy recommendations to help alleviate the financial burden on families.

What was the Build Back Better infrastructure bill proposed by President Biden and how did it relate to family support?

The Build Back Better infrastructure bill proposed by President Biden aimed to address family support policies at the federal level, including an expanded Child Tax Credit, a near-universal child care program, and a paid leave program, but faced opposition from key Democrats.

Outlines

00:00

💰 High Costs of Raising Children in the US

The first paragraph discusses the financial burden of raising children in the US, highlighting the high costs of childcare and education. It emphasizes the inadequacy of the free market in providing affordable childcare and compares daycare costs to in-state public college tuition. The speaker, Jeniece, a mother of two, and Darren Geeter, a CNBC producer, share their personal experiences with the exorbitant costs of childcare, which often surpasses rent and other living expenses. The paragraph also touches on the broader economic implications of these costs, including the impact on savings, the struggle to make ends meet, and the lack of comprehensive policies to support families financially.

05:01

🏦 The Struggle with Poverty and Policy Responses

The second paragraph delves into the struggles of American families, particularly those living in poverty, with over 12.5 million children affected. It discusses the stoppage of savings and the shift to a paycheck-to-paycheck lifestyle to cover basic expenses like rent and childcare in high-cost areas like the Bay Area. The paragraph also examines policy measures such as the Child Tax Credit, which was temporarily expanded during the pandemic to provide monthly payments and reduce child poverty significantly. However, the expansion expired in 2021, reverting the credit to pre-pandemic levels. The discussion includes the racial disparities in wealth and the inadequacy of the current tax credit for very low-income families, emphasizing the need for policies that support all families, regardless of income.

10:02

🤱🏻 The Need for Comprehensive Family Support Policies

The third paragraph focuses on the necessity for comprehensive family support policies, including subsidized childcare and paid family leave. It points out the US as the only OECD country without a federal paid leave program and the disparities in access to such leave based on race and income. The paragraph discusses state-level initiatives for paid family and medical leave, funded by payroll taxes, and the importance of federal investment in care infrastructure. It also touches on President Biden's Build Back Better bill, which aimed to address these issues but faced opposition. The discussion concludes with the argument for rebalancing federal spending towards children to ensure their well-being and the long-term benefits for the economy and society.

Keywords

💡Child Care Costs

Child care costs refer to the expenses incurred by families to provide care for their children, especially for infants and young children. In the context of the video, it is a significant financial burden for many American families, with the cost of daycare often exceeding college tuition. The script mentions that 'Sending an infant to daycare in many places, across the country is actually more expensive than in-state public tuition to send them to college,' highlighting the financial strain on families.

💡Daycare

Daycare is a service that provides care for children during the day, typically for working parents. The video emphasizes the high cost of daycare, stating that 'our daughter's daycare was more than Stanford's tuition,' which underscores the economic challenges faced by families trying to balance work and child-rearing responsibilities.

💡Middle-Class Families

Middle-class families are those with incomes that fall in the middle range of the income distribution. The script points out that even these families are 'increasingly struggling to pay for everyday expenses,' including child care costs, which have become a significant part of their budget.

💡Paycheck to Paycheck

Living paycheck to paycheck describes a situation where individuals or families spend all of their income as soon as they receive it, without saving, and often struggling to cover basic expenses. The video script illustrates this by stating, 'We were living paycheck to paycheck every month to pay rent in the Bay Area and pay for child care,' showing the financial pressure on families.

💡Poverty

Poverty refers to a situation where individuals or families lack the financial resources to meet basic needs. The video mentions that 'More than 12.5 million children in the U.S. live in poverty,' indicating the scale of economic hardship affecting children in the country.

💡Social Safety Net

The social safety net encompasses government programs designed to protect and support individuals and families who are facing economic hardship or unemployment. The script discusses the lack of a comprehensive social safety net in the U.S., which leaves families to rely on 'piecemeal programs' to make ends meet.

💡Child Tax Credit

The Child Tax Credit is a tax benefit for families with children, allowing them to reduce their tax liability based on the number and age of their children. The video explains that 'The Child Tax Credit allows parents to deduct a certain amount of money from their taxes at the end of each year,' and it was temporarily expanded during the pandemic to provide additional financial support to families.

💡Paid Family Leave

Paid family leave is a policy that provides employees with a portion of their income while they take time off to care for a new child or a family member with a serious health condition. The video points out that the U.S. is the only OECD country without a federal paid leave program, highlighting the need for such policies to support families.

💡Racial Wealth Gap

The racial wealth gap refers to the disparity in wealth between different racial and ethnic groups. In the video, it is mentioned that 'Families at the poverty line, if they're black in this country, on average have at or below $0 in net worth,' illustrating the significant economic disparities faced by different racial groups.

💡Build Back Better

The Build Back Better plan is a proposed piece of legislation that includes provisions for expanded social programs, including child care and paid leave. The video discusses President Biden's attempt to address family support policies through this bill, which faced opposition and was not passed in its original form.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The script notes that 'Child care costs have actually outpaced inflation,' indicating that the increase in child care costs is significantly higher than the general rise in prices.

Highlights

Raising a child in the US is very expensive, with daycare costs in some places exceeding in-state public college tuition.

The cost of daycare for an infant can be more expensive than Stanford's tuition, highlighting the financial burden on families.

Many Americans struggle to make ends meet, with over 12.5 million children living in poverty and even middle-class families facing financial strain.

Families in the Bay Area often live paycheck to paycheck, struggling to afford rent and child care costs.

The US lacks comprehensive policies to support families, relying on piecemeal programs to help people make ends meet.

The US has been reluctant to implement family policies, impacting the social safety net and the cost of raising children.

Improving the social safety net and reducing the cost of raising children is beneficial for both American families and the economy.

The fundamental issue is providing families with sufficient resources and time for stability, which is currently lacking.

The cost of raising kids in the US is high, and policies such as subsidized child care and paid family leave could help alleviate this burden.

The average family spends around 13% of their income on child care, which is more than the average household spends on groceries.

Child care costs have outpaced inflation, increasing the financial strain on families even before the COVID-19 pandemic.

The median black family with two kids spends a significant portion of their annual income on child care, exacerbating racial economic disparities.

The Family Budget Calculator shows that child care has become more expensive than rent in many places across the country.

The cost to raise a child from birth through age 17 is estimated to be nearly $286,000 in 2022, adjusted for inflation.

The expanded Child Tax Credit during the pandemic provided a significant boost to families, reducing child poverty and hunger.

The pandemic's expanded Child Tax Credit expired in 2021, returning to pre-pandemic levels which may not fully support families.

Paid family leave is crucial for parents to take care of their children, but the US is the only OECD country without a federal paid leave program.

President Biden's Build Back Better bill proposed comprehensive family support policies but faced opposition, highlighting the need for rebalancing federal investments towards children.

Transcripts

It's very expensive to raise a child in the US.

I knew it was going to be expensive, but I didn't know

it was going to be that expensive.

The free market works well in many different sectors,

but child care is not one of them.

Sending an infant to daycare in many places

across the country is actually more expensive than

in-state public tuition to send them to college.

When we looked it up, it turned out our daughter's

daycare was more than Stanford's tuition.

We didn't really start to dig into it until we had a

baby and I was on maternity leave.

And then the numbers really started to hit home and it

was like, how are we going to do this?

Many Americans are struggling to make ends

meet. More than 12.5 million children in the U.S.

live in poverty. Even middle-class families are

increasingly struggling to pay for everyday expenses.

We stopped saving any money altogether.

We were living paycheck to paycheck every month to pay

rent in the Bay Area and pay for child care.

In this country, we don't have comprehensive policies

and so that means we are working with piecemeal

programs to try to help people make ends meet.

I think the United States has just been very

reluctant, very conservative, when it comes

to these kind of family policies.

Improving the social safety net, lowering the overall

cost of raising children in this country is both the

right thing to do for American families and the

smart thing to do for our entire American economy.

The fundamental issue is not that we don't know what to

do. We know the children need stability.

The way to get to stability is making sure families have

sufficient resources and sufficient time.

If we know what to do, how do we pay for it?

Here's why it's so expensive to raise kids in the U.S.

and which policies could help Americans.

My name is Jeniece.

I am a mother of two children, a four-year-old

and a two-year-old.

And we live right outside San Francisco.

I'm Darren Geeter. I'm a producer for CNBC and

recently just had my first kid, my daughter Alma.

Basically, I've been on paternity leave for the last

eight weeks, so I'm halfway through.

Everything is very expensive in New Jersey.

People always warn you there's going to be a ton of

stuff that you need to buy for the baby, whether it

comes with diapers or wipes.

And we didn't necessarily understand how much we have

to buy.

If we had had two kids in full time daycare, it would

have been a lot more than rent.

So that's why it just absolutely wasn't an option.

And when we looked at the numbers for full-time

nannies in the San Francisco area, they all

charge about 80 grand a year.

We don't have concrete plans of what we're going to do

with child care because we know that child care can

range anywhere from $1,000 a month or some where it

could be like paying a double rent.

The average family with at least one child under the

age of five typically spends around 13% of the

family's income on child care, according to a

September 2021 Treasury Department report.

That's about one out of every $8.

That's more than what the average household spends on

groceries and nearly double what the government

considers affordable for low-income families.

Even before the COVID-19 pandemic, the median black

family with two kids was spending roughly 56% of

their annual income on child care, a bigger share

than any other racial group.

And of course, we know during COVID, for all

families, child care centers, school closures

were forcing parents to pay for child care in ways that

they never had had to before.

For over 20 years, the Economic Policy Institute

has produced something called the Family Budget

Calculator. And in that, we look at basic expenses

across the country: housing, child care if you

have kids, healthcare, transportation, food, other

incidentals, like household items, and your taxes.

One of the things we noticed when we were doing

this about four or five years ago is that child care

became more expensive than rent in many places across

the country.

The most recent report released by the Department

of Agriculture in 2015 estimated that for a

middle-income household with two parents and two

children, it would cost more than $233,600 to raise

a child from birth through age 17.

And that's in 2015 dollars.

With inflation, that number translates to almost

$286,000 in 2022.

The report calculated it would cost the hypothetical

family of four anywhere from $9,330 to $23,380 per

child in one year.

This range depends on the age of the child and income

of the parents. Adjusting for inflation, that range in

2022 would be between about $11,400 and $28,600.

But adjusting for inflation may not be enough.

Child care costs have actually outpaced inflation.

Child care prices surpassed annual inflation by nearly

4 percentage points in 2020, and that was before

the worst of the pandemic inflation woes.

And that data is based on middle-class, two-parent

households. Just think about what that cost looks

like when we're talking about single parents, or if

we're talking about families of color on the

struggling end of the racial wealth gap in this

country.

I'd say we're middle class for the area we're living

in. I actually am not sure how some people get by

living in the Bay Area that make less than my husband

and I do. We cannot wait until next year because one

of our children is going to public school next year and

we might finally be able to start saving some money

again.

Families that are right on the poverty line on average,

if they're white in this country, have $18,000 of net

worth. Families at the poverty line, if they're

black in this country, on average have at or below $0

in net worth. Just think about what that $18,000

difference means to parents when their second-grader

falls off the monkey bars and they're facing

unanticipated medical costs.

Policymakers acted very swiftly in the pandemic and

enacted policies that had tangible positive results

for workers and their families.

We do a lot of family supports through the tax

code, and the most prominent example here is

something called the Child Tax Credit.

The Child Tax Credit allows parents to deduct a certain

amount of money from their taxes at the end of each

year. That amount depends on several factors:

household income, how many children someone has, and

the age of the children.

The Child Tax Credit, enacted in 1997 with broad

bipartisan support, was enacted in response to slow

wage growth, higher cost of living, and a growing tax

burden for average households. It was enacted

to help reduce the tax burden on families with

children. To help reduce the cost of raising kids.

Congress temporarily expanded the policy during

the pandemic.

Bill, as amended, is passed.

The tax credit was raised to $3,000 a year for children

between six and 17 years old and jumped to $3,600 a

year for children five and under.

And for at least half of the year it was paid out

monthly. So both a kind of substantial boost in value

and this monthly payment.

So you're not waiting till the end of when you file

taxes the next year to get it.

And that provided a solid safety net to try to help

families really make ends meet during those tough

times. And it helped reduce hunger in families, very

tangible results of those kinds of programs.

In 2021 alone, the expanded Child Tax Credit was

estimated to lift 4.1 million children above the

poverty line and to reduce the number of children in

poverty by more than 40%.

People who have children, you know, that's work that

families are doing and it's work that they're doing on

behalf of all of us.

So this is a way to try to support families doing that

work that allows them to choose for themselves how

best to spend the money to invest in their children.

The pandemic's expanded legislation expired in 2021.

As of 2022, the tax credit is back to its pre-pandemic

levels, which maxes out at $2,000 per child with the

parents of younger children receiving a larger subsidy.

It's kind of a way to subsidize or support

parents, but it typically has not included very low

income parents. We've excluded parents who don't

have earnings, parents with disabilities or, for other

reasons that aren't in the labor force.

From the time it was enacted until last year's temporary

expansion, the Child Tax Credit was actually not made

available in full to 50% of black children and families

because their family's income were too low.

It's important to me, I think, that we have a Child

Tax Credit that is not connected to a work

requirement. To me, the Child Tax Credit is paying

for the work of being a parent, which is work that

benefits us all.

To attach additional work requirements to that, sort

of undermines this intent of helping families in a way

that makes sense for them.

There are two other policies that economists and other

experts advocate for when it comes to helping

families: subsidized child care and paid family leave.

These policies go hand in hand because paid family

leave means parents can stay home and take care of

their children themselves.

The U.S. is the only OECD country that does not have a

federal paid leave program.

Less than a quarter of U.S.

workers have access to paid family leave by their

employer.

There is a law on the books at the federal level that

requires employers to allow parents to take unpaid leave

up to 12 weeks as long as the private employer has 50

or more employees.

When it's unpaid, it's not really an option.

It's not really a choice that many families can take

across this country.

And it's not just low-income families.

There are many middle-income families that

are living paycheck to paycheck that simply can't

afford to take leave how it is now.

What we see is that black families, Latino families,

Native American families, workers are less likely to

be able to afford unpaid leave from work than white

workers, again reflecting and enhancing racial

economic disparities across the board.

There are some states and localities that have passed

paid family and medical leave, and that provides for

paid parental leave as one component of that, to make

sure that workers actually have the option to take that

leave.

Each state with paid family and medical leave sets its

laws up differently. But typically, the law requires

employers to provide workers with up to 12 weeks

of fully or partially paid leave per year.

The programs are often funded by payroll taxes from

workers, with some states also requiring employers to

contribute.

Paternity leave, for me, was 16 weeks and that's full

100% salary.

I wouldn't be able to do what we're doing without any

kind of leave.

One of the issues with childcare in the U.S.

is it's a patchwork system.

We have programs that fully subsidize for eligible

children at child care programs like Head Start and

some state preschool.

We have tax credits that subsidize a portion of child

care costs for higher income families.

And when we also have block grants to states to help

them expand access.

And the problem with all of these systems is that with

this multitude of approaches, we're not

getting close to universality or

affordability, we're not helping the workers in these

sectors, and we're not doing enough on quality.

There's a lot of value in having states move forward

and do these kind of programs, but ultimately to

have it be something that's available to everybody

everywhere, you need the federal government to be

willing to make these kind of investments in care

infrastructures.

There are so many moments that I would have missed if

it was back in the day where fathers would get like

two weeks. And those are some things that I will

cherish for the rest of my life.

Now we get a break.

President Biden tried to address all of these

policies at the federal level with his Build Back

Better infrastructure bill that he proposed even before

he entered the White House.

The president doesn't talk a lot about the Build Back

Better bill, but that was his proposal that included

things like an expanded Child Tax Credit, like a

near universal child care program that would have

capped the amount of income people had to pay toward

child care. It included a paid leave type program,

really included these big building blocks of a better

family support program that ran into opposition from one

key Democrat, Senator Joe Manchin, in West Virginia.

One of the things that I think is important is that

we think about rebalancing our investments toward

children because it pays for itself.

If we were to rebalance federal investments away

from senior citizens and toward children, not only

would raising a child be more affordable in the U.S.,

but the children would have sufficient resources, their

parents would be better able to think about how they

want to spend their time, whether it's that extra hour

at work or an extra hour playing with their kids.

All of those things become possible if we rebalance

federal spending toward kids.

We know that investing in our children has a

multiplier effect.

What it means for those children's families, what it

means for those children in adulthood, and what it means

for the entire economy just have incredible ripple

effects. And so investing in children actually impacts

Americans of all ages in addition to our entire

economy.