There’s one group of Americans missing from this year’s strong consumer spending picture: families paying for child care.
Spending by households paying for child care has lagged behind that of the rest of the population since May, according to a new report from the Bank of America Institute BAC.
Not only have they cut back on spending more than others, but they are also dipping into their savings more, the report found.
While the difference in spending is “fairly modest,” it “could reflect the increasing financial pressures facing families with young children,” the report authors said.
Nationally, families spent an average of more than $700 per month on child care in September, according to Bank of America, a 32% increase since 2019. San Francisco and Seattle had the highest average child care costs in September, nearly twice the national average. cost. average, the report shows.
Average child care costs per household have increased the most for higher-income families, with annual incomes ranging from $100,000 to $250,000, the report found. Those households could face bigger increases in the cost of child care, in part because they can afford to pay more for it, while lower-income families are more likely to forego child care as prices rise, said Anna Zhou, an economist at the Bank of America. Institute and author of the report.
A growing number of higher-income households began using child care in 2022 after a small baby boom largely concentrated among women with college degrees, who tend to have better finances, Zhou said. Overall, the number of households paying for childcare increased slightly between 2019 and 2022, the report said.
In some cities, average child care spending has increased faster than the national average. Tampa, Florida, saw the fastest growth in child care spending in September; the pace was 12% faster than the national level. Atlanta, Orlando, Dallas and Seattle followed.
Consumer spending remained at high levels in September, although some economists have warned this may not be sustainable as consumers rely on their savings to spend.
In income groups ranging from $50,000 to $250,000 a year, families paying for child care saw a deeper decline in their savings in September compared to other households, the Bank of America report found.
However, many parents and families still have some financial breathing room as their savings amount will be 30% higher in 2023 than in 2019, according to internal Bank of America data, Zhou told MarketWatch. Those who don’t pay for child care have more money in their bank accounts, she continued.
“For now, [parents] Things are going well because they still have money to draw on,” Zhou said. “But if this continues for the foreseeable future, it could have a greater impact on these households and overall consumer spending.”
While American families saw their wealth increase overall during the pandemic, couples with children saw slower wealth growth on average, according to the Federal Reserve. Couples without children had an average net worth of $398,960 in 2022, up 37% from 2019 levels. That’s compared to couples with at least one child who had $291,770 in 2022, up 34% from the 2019 level.
Researchers at Bank of America say there are indications that parents may leave the workforce due to rising child care costs. The average number of payroll payments deposited into Bank of America accounts for households paying for childcare was 1.34 payroll payments per month, slightly lower than in 2019, when it was 1.39 payroll payments per month, the study found .
About $24 billion in pandemic-era government child care funding expired on September 30, paving the way for child care prices to become more expensive due to rising operating costs for providers. In some states, such as Pennsylvania, Wisconsin and North Carolina, child care centers and programs have closed, and some have had to raise prices. The Biden administration last week asked Congress for another $16 billion to reverse what some experts called “the child care cliff,” but it’s uncertain how a Republican-led House will decide that.