Ask any parent: Raising children has never been cheap. But new data shows just how expensive it can be when working parents rely on day care.

A recent study from LendingTree shows full-time child care for two children is now 40% more expensive than the average rent in the country’s largest cities.

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Those added costs strain young families who are already cash-strapped, many of whom wrestle with stagnant wages and living expenses. With the nation’s declining birth rate, it’s fair to question whether these costs are adding another layer of pressure on couples deciding if they can afford to have children.

A financial squeeze: Child care costs vs. rent

The study, which analyzed the 2023 Child Care Aware of America annual report as well as rent and Bureau of Labor Statistics data, found the cost of child care for infants and pre-school children across the 100 largest cities averages about $26,000 annually. That’s 40% more than the average two-bedroom rent of $1,566. In some of the most expensive cities, such as San Francisco and New York, the cost of child care can be $30,000 or higher a year for two kids.

“Both of these costs have been rising for some time, even before inflation took hold of the country,” said LendingTree chief credit analyst Matt Schulz. “Unfortunately, no one should expect these costs to start falling anytime soon.”

The expense has left many families seeking a balance of essential costs. Many bills have long-term implications, forcing some parents — often mothers — to leave the workforce or reduce their hours, sacrificing career advancement and retirement savings.

Cost alternatives

Though the costs are daunting, there are ways to offset the rising expenses.

Many companies now offer dependent care flexible spending accounts (FSAs), allowing employees to set aside pre-tax dollars for child care expenses. In 2024, the maximum amount a family can contribute to a dependent care FSA is $5,000 — a significant tax savings.

Families should also explore the Child and Dependent Care Tax Credit, which allows parents to claim up to 35% of $3,000 in child care expenses for one child or $6,000 for two or more children. It’s based on your income. It won’t cover the whole cost, but the credit amounts to meaningful relief when combined with other benefits.

It’s also worth checking with your employer about child care subsidies or partnerships with local day care providers. Some companies offer direct assistance or discounted services through corporate affiliations, which can help lower costs.

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Shared child care solutions

Families living in the same neighborhood or community can come together to hire a caregiver for a small group of children. Called the nanny share model, it allows parents to split the cost of one provider, making it more affordable than full-time daycare.

Similarly, many parents are turning to local cooperatives, where parents take turns watching each other’s children. These co-ops often have low costs or involve bartering. They allow families to cut down significantly on expenses while still ensuring quality care. However, shared arrangements require trust and coordination among participating families.

Take advantage of government programs and subsidies

For lower-income families, government programs can offer essential financial relief. Federal and state governments provide child care subsidies through programs like the Child Care and Development Block Grant(CCDBG), which helps low-income families cover the cost of child care. Families can apply for these subsidies through their state’s Department of Human Services or equivalent agency. The amount of financial assistance can vary, but it can dramatically lower out-of-pocket expenses for daycare.

Some states offer universal pre-K programs that provide free or reduced-cost preschool for children ages three and four. These programs, available in states like Georgia, Florida, and New York, are aimed at helping ease the financial burden once children reach pre-school age.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.