According to a study released last month, the average American family falls far short of having sufficient income to comfortably afford childcare.
Federal guidelines state that childcare is affordable if it accounts for no more than 7% of household income. LendingTree, citing data from Child Care Aware of America, discovered that the average annual cost of caring for an infant and a 4-year-old is $28,190 across the nation.
To meet the 7% benchmark, a household would need an annual income of $402,708. However, the average income of a two-child household is $145,656, meaning the typical family would need a 176.5% increase in pay to reach the affordability threshold.
Matt Schulz, LendingTree’s chief consumer finance analyst and author of Ask Questions, Save Money, Make More: How to Take Control of Your Financial Life, stated, “Most parents can tell you that childcare costs are exorbitant nowadays and can impose a significant financial burden, even on high-income families.”
When examining individual states, the affordability situation becomes even more dire. In 20 states, families need at least three times the average income of a two-child household to afford childcare easily. These states include Hawaii, where families need nearly 270% more, followed by Nebraska (263.0%) and Montana (257.8%).
In contrast, South Dakota has the most affordable childcare costs at $16,702. Even so, families would need to earn $238,600, which is 95.4% more than the average income in that state.
Racial disparities are also significant. American Indian and Black families need more than 300% of their income to reach the affordability benchmark, whereas white families need 147% and Asian families need nearly 95% more.
Schulz stated, “Given these numbers, it’s easy to understand why birth rates are declining. Many Americans are saying that having children doesn’t make financial sense. It will take the combined efforts of our political and business leaders to alter the state of childcare costs in our country, but such change won’t happen anytime soon.”
In fact, the birth rate dropped to an all-time low in 2024, with fewer than 1.6 children per woman, as reported by the Centers for Disease Control and Prevention last summer.
Meanwhile, the number of births reported via birth certificates in 2025 was about 24,000 fewer than in 2024, continuing a long-standing trend.
To assist families in dealing with childcare expenses, LendingTree recommended maximizing employer benefits, such as dependent care flexible spending accounts, and exploring alternative arrangements, such as nanny shares, co-ops, a mix of informal and licensed care, or part-time preschool.
It also urged families to adjust their work schedules to reduce the number of paid care hours and to inquire with providers about sibling discounts, sliding-scale fees, and flexible payment options.
These findings coincide with Americans facing an affordability crisis that has extended to various basic expenses, including food, electricity, insurance, healthcare, and housing.
Along with a significant slowdown in the labor market, a large-scale voter revolt is gathering momentum ahead of this year’s midterm elections.
Admittedly, economic data indicate cooler inflation, steady income growth, and robust consumer spending. However, according to Michael Green, chief strategist and portfolio manager at Simplify Asset Management, conventional measures fail to capture the extent to which Americans are struggling with the cost of living.
In a statement in November, he specifically targeted the federal government’s poverty line, which dates back to the early 1960s and was calculated by tripling the cost of a minimum food diet at that time.
The poverty line’s narrow focus on food overlooks how much other expenses are now consuming incomes and underestimate the minimum amount Americans need to make ends meet.
Green estimated that food makes up only 5% to 7% of household spending, while housing accounts for 35% to 45%, childcare for 20% to 40%, and healthcare for 15% to 25%.
He added, “If the crisis threshold—the level below which families can’t survive—is honestly updated to current spending patterns, it amounts to $140,000. What does that say about the $31,200 line we still use? It means we’re measuring starvation.”