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5 Reasons Why Texas Daycare Costs Are Skyrocketing (and How to Cope)

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5 Reasons Why Texas Daycare Costs Are Skyrocketing (and How to Cope)
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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
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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 

Child Care Deserts
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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

Staff Shortages
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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

High Operating Expenses
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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 

Loss of Funding
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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
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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

Taxes
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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
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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.

How to Use the Money When You No Longer Pay for Daycare

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Picture of daycare toys on a shelf

When you have a newborn baby, the expenses come fast and furious. Diapers are expensive, as is formula (if you need to buy it). However, those expenses are small compared to daycare costs. Depending on where you live, daycare can cost $1,000 or more monthly. Many parents count down until their child enters school, and they can reclaim the money spent on daycare. But not so fast. What if you reallocate the money when you no longer pay for daycare for future expenses your child will incur? (Trust me, costs keep climbing as your child moves into the tween and teen years.)

Why Should You Reallocate the Money?

Since you’re already spending a set amount for daycare, you’re used to paying that cost. So why not keep putting aside the money when you no longer have to pay for daycare? Future you will be thankful you did this.

How to Allocate the Money

Tweens and teens are lovely, but they’re also expensive! Here are some of the upcoming expenses that you may want to save for by using the money you used for daycare:

Braces

Picture of a girl smiling with braces on her teeth.

I have three kids, and two of the three needed braces. Thankfully, we had good dental insurance that covered approximately half of each child’s cost. However, even with the insurance, we still had to pay $6000 out of pocket, roughly $3000 for each kid. We started a braces fund when our first child was nine, but even then, we had to finance and pay monthly. Imagine if we had invested the money we paid for daycare. We could have covered the cost of braces from this fund since daycare for our oldest cost $800 a month (and that was over a decade ago).

Future Activities

Kids’ activities can be expensive, especially if they join traveling sports teams. My daughter takes one dance class a week, but some girls in her class are part of the company and take five to eight dance classes per week. The cost of the classes, dance shoes, and performance costumes adds up quickly. If you have more than one child with this type of dedication, the cost of classes can come close to the cost of daycare expenses.

College Fund

Finally, and perhaps most importantly, consider setting aside the money you no longer pay for daycare for a college fund. Putting money into a college fund as soon as your child is born is the wisest decision because of the power of compounding interest. However, when your child is five and attending school, if you funnel all of the daycare money into a college account, you’ll be in a strong position to pay college expenses.

Final Thoughts

Considering how you will reclaim the money for daycare once your child is in school is attractive. However, for your financial future, the more intelligent decision might be to use the money to save for other expenses your child will have, especially college expenses.

Read More

A Financial Guide to Childcare

5 Ways You Can Save Money on Braces for Your Kids

How Much Do Braces Cost and How Can You Save Money?

Why I’m Glad with My Decision to Put my Child in Daycare

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Are you scared to put your child in daycare? If so, I want to let you know it's not as bad as you think. Here's why I'm happy I put my child in daycare.Last week my daycare provider contacted me about being a reference or another potential family. One of her kids is getting ready to leave in the spring and interviews for the open spot have started. I couldn’t be happier to provide the reference since I am so happy with my experience in her caring for our daughter while we’re at work, pursuing our careers.

I’m of the opinion that a mother should never have to choose between a career and a family. I have never wanted anymore more than to be a mother but I also feel like I have a lot to offer my community in my career. Life is about balance and for me that’s balancing motherhood and my job. With both my husband and I working, me four days per week, him five, daycare was essential.

I already wrote about my process for choosing our provider but never talked about the positive experiences we’ve experienced since she started, 19 months ago.

She Gets to Play with Other Kids

Our daughter is our only child. When she is home with us, she gets undivided attention which, as an only child, has its pros and cons. Other than her dad and I, she has no playmates at home. While we love playing with her, interaction with other children is crucial. I love watching her interact with her peers. I see natural qualities in her (like leadership and silliness) come out that I believe get masked at home playing with her much older parents. The fact that she gets to go to someone’s home and play with two other kids her age, four days a week, makes me happy. She has so much fun.

She Gets Used to Outside Authority

No two parents, parent the same way. I enjoy having diversity in her upbringing. I like having an added variation in authority for her to get used to. Life will throw millions of different personality traits at her in meeting and dealing with new people, starting young can only help this.

She is Safe and Loved

My husband and I don’t know everything. We’re first-time parents. The woman who is caring for her not only has two children of her own but has cared for many children over the years. She is far more experienced in parenting than I will likely ever be. I genuinely appreciate what her babysitter brings to the table in terms of her parenting abilities. She is a loving, sweet woman who cares for our daughter as one of her own, I could never thank her enough for this.

Our daughter is in a safe, loving , environment where she is free to explore and learn, allowing my husband and I time to pursue interests of our own in our careers. For us this is a great balance. There was a time I was extremely reserved about sending her somewhere while I was far away from our home but I couldn’t be happier with our decision to send her to daycare.

Are/were your kids in daycare? What was your experience like?

Choosing Daycare: Finding the Perfect Fit

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With my return to work fast approaching, my quest in choosing daycare for baby girl is top priority. Choosing a childcare provider is one of the hardest and most thought through decisions parents make. No one would argue that the ideal candidate for proving childcare are the parents, but in today’s world, it is more common that both parents return to work after their child is born.

I consider myself very fortunate that here in Canada I’m allowed to have a full 52 weeks off after my child is born for maternity leave. Spending the first year home with her has made my choice to breastfeed possible and dealing with her sleep issues a little easier. Having it come to a close is sad.  (For reference, women in the United States get 6 weeks of paid family leave and 12 weeks of unpaid family medical leave to care for a child).

Choosing Daycare Options

My husband and I sat down to discuss what type of daycare we wanted our little one to attend. Did we want a registered, licensed center with many children and providers (or employees) or did we want to find a place within someone’s home? There are pluses and minuses for both but ultimately we decided we would focus our efforts on finding a home-based care. If you’re also considering Day care in Bear, DE, or your local area, it’s essential to take your time in researching options that fit your family’s needs. Finding the right care for your child can ease the transition back to work and give you peace of mind knowing they’re in safe, nurturing hands.

The Benefits and Risks when Choosing Daycare

Both my sister and I were raised going to someone else’s home for daycare and loved it. The benefit is that my husband and I have the choice of finding a place very close to our own home, few children, more one-on-one care, and in my mind, a more natural transition from being at home all day with mom to daycare.

The downside of looking for a home based daycare is that we as parents have to be that much more careful. Though many do, a home based daycare isn’t required to abide by the same regulations as a traditional licensed center. Choosing to look for a daycare based out of someones home means we’re required to double and triple check everything. Do they have a criminal background check? Do they know child CPR? How are their references? These are just some of the many questions we’re making sure we have answered.  Questions that should almost go without asking if we were looking at a licensed center.

Even with all this extra homework we decided to continue our pursuit to finding the perfect home-based daycare. If we came up empty handed we would re-direct our efforts to something else.

Jackpot!  Finding the Perfect Daycare

One of the downsides of a home based daycare is that they usually don’t have much of anything in terms or advertising. They rely a lot on word of mouth or mutual contacts. I did manage to find a few who were advertising open spaces via our online classifieds, but nothing that would work for our family. Most of them were located too far from our home.

I decided to place an ad, listing what I was looking for and managed to find what we think will be a perfect place.

The home is located two streets from our house, no more than a five-minute walk. She is a former elementary school teacher, her husband a current vice principal. She decided to stay home after her youngest was born and take a few kids in to watch while at home. She has full criminal and child abuse registry checks done, up-to-date CPR and for us Canadians, offers income tax receipts. She takes a max of four children at once. Our little one will be number four, she’s had the other three for a few years now (another good sign). We’re excited that she comes from another culture and may be able to introduce experiences, food and traditions to our kiddo we otherwise wouldn’t.

Finding a place that my husband and I were comfortable with is going to make my return to work that much easier. Though it hasn’t happened yet I have solace in knowing she’ll be close to home with a trusted individual learning new things and interacting with other children.  I’ll be sure to report how it actually goes after her first few days!

How did you chose the daycare for your children? Any tips for making my back to work transition easier?