Inflation may have eased from the highs of 2022, but price hikes are still dealing a devastating blow to millions of Americans – particularly parents.
Recent findings from the Federal Reserve's Economic Well-Being of U.S. Households report for 2023 show that just 64% of parents with kids under the age of 18 reported doing at least OK financially last year, the lowest level since 2015 when the survey began.
One reason for the financial pessimism is that parents are shelling out even more money for child care. Parents reported spending as much as 70% per month on child care as they did on their housing payments, which is most people's single largest monthly expense.
Research published by LendingTree shows that the cost of child care surged nearly 20% between 2016 and 2021, the latest year for which complete data is available. Annual expenses, excluding tax exemptions or credits, hit $21,681 in 2021, versus $18,167 in 2016, the data shows.
HIGH INFLATION IS CHANGING THE WAY AMERICANS RETIRE
"The cost of everything is rising," said Matt Schulz, LendingTree chief credit analyst. "There’s so much that goes into child care, including rent, payroll, insurance and much more. When all those costs shoot up, the overall cost of child care does, too."
That means the typical family is spending about $237,482 over the course of 18 years to raise a child – and that is excluding the cost of college.
INFLATION INCREASES 3.4% IN APRIL AS PRICES REMAIN ELEVATED
Another LendingTree study shows that about 75% of parents think that having and raising children has been far more expensive than they expected. In fact, more than half of parents – about 55% – admit to having gone into debt in order to pay for child-related expenses.
Families with young children say the biggest financial burdens of childrearing are food (21%), child care (19%) and clothing (13%).
If prices continue to climb, it could force consumers to pull back on spending in other areas.
While inflation has fallen considerably from a peak of 9.1% notched during June 2022, it remains well above the Federal Reserve's 2% goal. On top of that, prices are up a stunning 19.4% since January 2021, before the inflation crisis began.
High inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. Grocery prices are up more than 21% from the start of 2021, while shelter costs are up 18.37%, according to FOX Business calculations. Energy prices, meanwhile, are up 38.4%.
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Price hikes are particularly troubling for lower-income Americans because they tend to spend more of their already-stretched paycheck on necessities and therefore have less flexibility to save money.
The typical U.S. household needed to pay $227 more a month in March to purchase the same goods and services it did one year ago because of still-high inflation. Americans are paying on average $784 more each month compared with the same time two years ago and $1,069 more compared with three years ago.
