cost of day care Archives - Kids Ain't Cheap

5 Reasons Why Texas Daycare Costs Are Skyrocketing (and How to Cope) — Image Source: Pexels

Child care has always been expensive, but the average cost of daycare in Texas has skyrocketed over the past few years. Inflation and worker shortages have forced many daycares in the state to raise their prices. As a result, care for a 4-year-old costs an average of $800 per month, which is out of reach for many families. To help you understand the child care landscape in Texas, we’ll explain why costs are surging and cover financial strategies to help you cope.

Why the Average Cost of Daycare in Texas Is Skyrocketing

Population Growth

Population growth is one of the reasons why the average cost of daycare in Texas is skyrocketing. From April 2020 to July 2023, the state’s population grew 4.7%, with many families relocating to major cities like Dallas and Austin. Newcomers have increased the demand for child care, and unfortunately, there aren’t enough child care providers to go around.

Child Care Deserts

As mentioned above, Texas is experiencing a shortage of childcare providers. In fact, more than half of Texas counties have become child care deserts. In these areas, there are three times as many children under 5 than the number of daycare slots available. Due to this shortage, many parents are forced to stay at home with their kids instead of working. It’s estimated that lack of child care costs the state over $11 billion in lost productivity.

Staff Shortages

Daycare centers have a difficult time finding qualified staff, which limits the number of children they can safely accommodate. According to the Texas Legislative Study Group, low wages may be contributing to staffing challenges. On average, daycare workers in Texas are paid just $11.43 per hour, well below the national average of $14.60 per hour. As a result, daycare centers have trouble attracting workers, and the industry has high employee turnover rates. Unfortunately, these staffing shortages have driven up the average cost of daycare in Texas to a level that’s unaffordable for many families.

High Operating Expenses

Daycares have high operating expenses, which is why they often can’t afford to provide competitive salaries. Despite low wages, labor costs still account for 80% of the average child care center’s budget. Daycares also spend heavily on nutritious meals and enrichment activities, leading to slim profit margins. Many child care centers have been forced to close due to insufficient revenue. Between March 2020 and January 2023, 5,000 child care providers shut their doors.

Loss of Funding

Unfortunately, loss of pandemic-era funding may increase the average cost of daycare in Texas even more. In 2026, daycares will stop receiving federal stimulus funding. Since these funds are helping offset high operating costs, daycares may be forced to raise their prices when the stimulus ends.

How to Cope with Rising Daycare Costs

The average cost of daycare in Texas can feel downright unaffordable. Here are some financial strategies you can implement to help your family cope.

The Texas Workforce Commission

The Texas Workforce Commission provides child care scholarships for eligible children under 13 to allow parents to attend work or school. TWC’s Child Care Management Services requirements differ from county to county, and applicants have to pass an eligibility screener. Once approved, these scholarships can cover a portion or all of the costs associated with child care. Their website can help you identify local service providers who accept the benefits.

Taxes

The Child and Dependent Care Credit is a tax break that can offset the cost of daycare. The tax credit can be applied to 20-35% of qualifying daycare expenses, helping to relieve some of your financial burden. However, you must be a working parent or looking for a job to qualify, and the tax credit may be smaller for higher-income families.

Flexible Spending Accounts

FSAs help with the average cost of daycare in Texas — Image Source: Pexels

Your employer may offer a Dependent Care Flexible Spending Account, which allows you to set aside pre-tax dollars for child care costs. However, there’s a limit to how much you can contribute to an FSA. Single-filers can only deposit up to $5,000 per year even if the amount they spend on daycare is higher.

How do you cope with the cost of daycare? Share your tips in the comments.

Vicky Monroe

Vicky Monroe is a freelance personal finance writer who enjoys learning about and discussing the psychology of money. In her free time, she loves to cook and tackle DIY projects.

The Biggest Childhood Expenses You’re Likely to Face

Age 0 to 1: Diapers

Diapers are expensive. Not only is the price daunting ($20+ to $40+), the amount that a new parent goes through can be astounding. On average, a baby will go through over 2,000 diapers in his or her first year of life.

How to Save: To get a leg up on that expense, open a second checking or savings account just for baby expenses. Drop an allotted amount of cash in the account every month. You’ll soon have a steady cash flow for that expensive diaper fund.

Age 2 to 3: Day Care

I have known day cares to charge under $200 a week, to up to $1,000 a week depending on the region. For example, the $1,000 dollar a week

For example, the $1,000 per week day care in my area caters to the children of doctors, judges, lawyers and prominent corporations. However, no matter if you are a high-income earner or average Joe, day care can be brutal on a family’s budget.

The average cost of day care in the U.S. is $11,666 per year. However, the range can fluctuate depending on the area you are in between $3,582 to $18,773 a year.

How to Save: Sometimes you can offset the cost a little if you:

Consider working at a day care to receive an employee discount.

Find a center that offers a discount for siblings.

Price the cost of living and decide if it’s financially healthier for you to work less and stay home with your child.

Age 4 to 5: Preschool and Health Care

Depending on where you live and the quality of the school, the price for preschool could be very high. The average cost of sending your child to preschool is between $4,460-$13,158 per year.

Health care is another big expense, especially in the early years. Not only do little ones get sick more often because their immune systems are not built up, but other health care expenses can arise too. Things like special therapies (speech, occupational, etc) or disabilities may not be covered under some insurance plans. Special surgeries or uncommon injuries may not be covered, either.

This means parents have to pay outrageous amounts of out of pocket expenses for things not covered under their plan.

How to Save: Find out what your insurance plan does and doesn’t cover. Consider opening a Health Savings Account and stockpiling it for unknown health-related expenses. The great thing about an HSA is that its contributions are tax deductible.

In Conclusion

There are many things to think about when you have a new baby. Focus on the biggest childhood expenses and figure out how you are going to best navigate each one. This will help to ensure a financially sound first five years.

How do you save money for your family’s biggest childhood expenses? Share one or two ways with us below.