Married American couples considering a second child face a tough reality. InvestorsObserver examined the affordability of 50 metro areas and found that most families need to spend nearly 80% of their income on child-related costs.
“Many American households are experiencing financial hardship and shortages, with some living in poverty. As prices and expenses continue to rise, examining how government support can assist parents in managing these challenges more effectively is crucial,” said InvestorsObservers lead researcher Sam Bourgi.
Costs of Having a Family
Between January 2020 and September 2024, the price of daycare and preschool rose about 22%, putting some families in real economic hardship. In addition, the slower growth of wages and the constant growth of all expenses, including food, clothing, and school supplies, need to be considered.
It is well-documented that poverty can have long-term developmental impacts on children, along with adverse health effects and increased psychological stress. Families in the least affordable cities face chronic financial stress that can delay childbearing, reduce discretionary spending, and erode long-term savings.
The 10 Most Unaffordable Metro Areas
InvestorsObserver estimated the cost of raising one child in each metro area by including only food, childcare, and medical expenses. Then, the percentage of the median income that covers these essentials was calculated. Surplus or deficit is the difference between median income and the annual cost of basic family expenses, including child-rearing.
In these metros even two-income households struggle to cover expenses while raising children:
Detroit: Families face deficits of $14,022 for one child, $33,285 for two children, and $52,770 for three children.
Cleveland: The deficit reached $2,454 for one child, $26,470 for two children, and $47,334 for three children.
Philadelphia: Families fall short by $2,116 for one child, $31,307 for two children, and $60,608 for three children.
McAllen: Deficits of approximately $13,170 for one child, $17,275 for two children, and $32,644 for three children.
Milwaukee: With an affordability score of 97.8%, some families can manage one child, but deficits still total $1,059. For two children, the deficit reaches $24,379, and for three, it reaches $45,245.
Miami: Deficits of $3,926 for one child, $14,896 for two children, and $39,824 for three children.
New York City: Families with one child see a small surplus ($6,427), which turns into deficits of $23,047 for two children, and $53,416 for three.
Riverside–San Bernardino: Surplus of $11,097 for one child, turning into deficits of $10,637 for two children and $37,450 for three children.
Los Angeles: Surplus of $12,569 for one child, but deficits rise to $13,257 for two children and $46,852 for three.
San Diego: Surplus of $11,314 for one child, but deficits of $6,828 for two children and $28,088 for three.
“Parents are left to make difficult decisions: work longer hours and miss family moments, depend on unreliable informal care, or quit the workforce altogether. This leads to a widening gap between family income and children’s needs, with long-term effects on education and health,” said Bourgi.
How Families Can Ease The Burden
Bourgi says that there are several ways people can ease the financial burden if they already live in these most unaffordable metros and have more than one child.
Parents should prioritize tax-advantaged benefits and employ various employer programs and investments. The 529 plan is one of the more popular options. You can choose from prepaid tuition plans and savings plans, enabling parents to invest for higher education fees and other expenses.
Additionally, by utilizing dependent care FSAs available through the workplace, families can save up to $5,000 annually in pretax funds for childcare expenses.
Another way to save on childcare costs is the growing interest in splitting childcare arrangements, like sharing one nanny. This allows families to split the price of a nanny, cutting individual expenses by up to 50% or even more.
Bourgi stresses that financial planning remains one of the most essential parts. “Before expanding your family, you must establish an emergency fund covering up to a year of expenses and plan your finances. Don’t forget that unexpected costs hit harder in high-cost areas, and when you least expect them.”
The System Is Not Working
A recent report from Child Care Aware of America found that the current system is unsustainable and families face costs well beyond what is affordable. Since the child care system serves both parents and businesses, it currently fails to meet the needs and requires investment from federal, state, and local governments.
With new generations choosing to live childless lives, providers face challenges in delivering quality and affordable care. Families are overwhelmed by increasing costs, and federal funding is insufficient to meet the demand.
Modern families encounter economic challenges that make raising children even more difficult beyond childcare: In 2022, approximately 41% of adults reported carrying debt from medical or dental bills, including amounts owed to credit cards, collection agencies, family and friends, banks, and other lenders to cover healthcare expenses.
In addition, according to the Federal Reserve Bank of New York, U.S. household debt reached a record $18.39 trillion, and 69% of Gen Z consumers live paycheck to paycheck.
ABOUT SAM BOURGI
Sam Bourgi is a finance analyst and researcher at InvestorsObserver, bringing over 13 years of expertise in financial markets, economics, and monetary policy. His professional background spans the private, nonprofit, and public sectors, where he has held positions such as senior policy adviser, labor market analyst, and marketing director. Sam’s in-depth research and market analysis have been referenced by leading institutions and organizations, including the U.S. Congress, Department of Justice, Chicago Board Options Exchange, Bank for International Settlements, Boston University Law Review, Barron’s, and Forbes. Sam regularly appears on TV, including CBN, KFYR TV, and ABC30, and is often quoted by such media outlets as the SF Chronicle and MSN.
ABOUT INVESTORS OBSERVER
Investors Observer is a trusted source of independent financial analysis, market insights, and investment research for individuals and institutions. Founded to empower retail investors with actionable intelligence, InvestorsObserver delivers timely commentary, data-driven studies, and accessible financial tools designed to simplify complex market trends. Its research and insights have been featured by various media outlets, including Yahoo, The Guardian, Morning Star, Nasdaq, and more.
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