If you are raising two young kids right now, you already feel the financial weight of child care pressing down on your household budget every month. Your grocery bill stings, your rent or mortgage payment hurts, but your child care tab likely rivals both of those major expenses put together.
A new LendingTree study puts a hard number on that gut feeling, and the result is far worse than most parents would ever expect. The research finds that your family would need an income increase of roughly $257,000 to meet the federal government’s definition of affordable child care.
The implications for your retirement savings, debt repayment, and long-term financial security are genuinely massive. The data connects directly to declining U.S. birth rates as more Americans decide that having children simply costs too much right now. Here is what the LendingTree analysis found.
Your family needs $402,708 in income to afford child care for two kids
The LendingTree study finds that average annual child care for an infant and a 4-year-old totals $28,190 across the nation right now.
The U.S. Department of Health and Human Services says child care is affordable only when it takes up no more than 7% of your household income. To stay within that 7% mark on $28,190 in annual care costs, your household would need to bring in $402,708 every single year without exception.
Even upper-middle-income families are stretched
If that number makes you feel like the system was not designed with families like yours in mind, the data confirms that your instinct is completely right. The average household with two children earns $145,656 per year, according to LendingTree’s analysis of Census Bureau data on American household incomes.
That means your typical two-kid family falls roughly 176.5% below the income level required to meet the federal government’s affordability standard for care. “Most parents could tell you that child care costs are astronomical and can cause a major financial burden,” says Matt Schulz of LendingTree directly.
Schulz, the company’s chief consumer finance analyst, adds that these costs are “forcing families to make major sacrifices” across their financial plans. For you, that sacrifice might mean less money going into your 401(k), slower progress on your student loans, or a thinner emergency fund at home.
American Indian and Black families face the widest child care affordability gaps
If the national picture is bleak for your family, the racial breakdown is devastating for communities that have long faced systemic financial inequities.
American Indian households with two children earn an average of $94,094 per year and would need 328% more income to meet the federal care benchmark. Black families earn an average of $98,019 and would require a 310.8% increase in earnings to afford center-based care for two young children comfortably.
The wealth gap keeps widening even as overall household wealth rises
You would hope that rising wealth across the country would narrow these gaps over time, but the Federal Reserve’s Survey of Consumer Finances shows the opposite trend. Between 2019 and 2022, the wealth gap between white and Black households widened by $49,950, reaching a total difference of roughly $240,120 in wealth.
“The fact that no group is even remotely near meeting these affordability thresholds tells you an awful lot,” Schulz says about the disparities in data.
Asian households come closest at an average two-child income of $206,883, but they still need 94.7% more earnings to reach the federal affordability mark. White families follow at $162,885 in average income, still needing a 147.2% increase to reach a comfortable level of affordability for their child care.
20 states require triple the average income for child care to be affordable
You might assume that unaffordable child care is strictly a problem for families in expensive cities like New York, San Francisco, or Honolulu right now.
The LendingTree state-level data shatters that assumption because 20 states require at least triple the average two-child household income just to meet the 7% federal threshold. Hawaii leads the nation with average annual child care costs of $38,107 for an infant and a 4-year-old in center-based care, according to LendingTree’s analysis.
The 5 states where your childcare affordability gap is the most extreme
- Hawaii: $38,107 average care cost, $544,386 income needed, 269.7% above the $147,249 average two-child household income in the state right now.
- Nebraska: $33,885 average care cost, $484,071 income needed, 263% above the $133,357 average two-child household income in the state right now.
- Montana: $29,380 average care cost, $419,714 income needed, 257.8% above the $117,314 average two-child household income in the state right now.
- Maryland: $40,922 average care cost, $584,600 income needed, 247.9% above the $168,047 average two-child household income in the state right now.
- Massachusetts: $47,012 average care cost, $671,600 income needed, 246.8% above the $193,671 average two-child household income in the state right now.
Nebraska proves that low living costs alone cannot protect your family from this crisis
If you live in Nebraska, you might think your relatively affordable cost of living should shield your household from the worst of this child care crunch.
Nebraska has the 13th-lowest cost-of-living index nationally at 91.6, but infant child care costs there actually exceed the average monthly rent, according to LendingTree. Only 14% of Nebraska families meet HHS affordability guidelines, according to the Economic Policy Institute.
South Dakota families come closest to meeting the federal child care benchmark
If you are looking for a silver lining anywhere in this data, South Dakota offers the smallest gap between what families earn and what affordable care requires.
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Average annual child care costs there total $16,702 for an infant and a 4-year-old, the lowest combination in the entire LendingTree study across all states. Your family would still need to earn $238,600 to meet the 7% threshold, which is 95.4% above the average household income of $122,100 among South Dakota families with two children.
Even the most affordable states still leave families short of the federal benchmark
Mississippi and Alabama follow closely behind South Dakota, with families in both states needing 109.5% more income than they currently earn to cover child care costs.
These states benefit from cost-of-living indexes ranked among the lowest nationally, with Mississippi at 85.5 and Alabama at 87.9 on the affordability scale. “The numbers are daunting everywhere,” Schulz says, making it clear that no state offers child care pricing that your average family can comfortably afford.
Soaring child care costs are directly connected to falling U.S. birth rates
If you have ever told yourself that having another child just does not make financial sense right now, millions of other Americans share that exact feeling.
The U.S. fertility rate dropped to an all-time low of 1.599 births per woman in 2024, per the CDC’s National Center for Health Statistics. That figure is well below the 2.1 replacement level needed for population stability, continuing a downward trend that started back in the early 2000s.
Finances are now the top reason families are choosing to have fewer children
A 2025 American Family Survey found that 70% of respondents now say raising children is just too expensive, jumping 13 points from the prior year’s findings. For the first time in the survey’s 11-year history, finances topped the list of reasons Americans give for limiting the total size of their own families.
Karen Benjamin Guzzo, director of the Carolina Population Center at UNC Chapel Hill, has found in her research that economic uncertainty and worry about the future are key factors suppressing fertility intentions, independent of people’s actual financial circumstances.
If you are on the fence about expanding your family, the LendingTree data confirms that your financial hesitation is both shared and completely rational today.
Six strategies that can help you bring your child care costs down starting today
You cannot control what child care costs in your state, but you have several practical tools available to reduce what your family pays each month.
Related: The inheritance mistake that can tear families apart
No single move eliminates the expense, but combining multiple approaches can save you thousands of dollars every year on your total child care expenses. Here are the most effective strategies to evaluate based on your household income, your employer benefits, and your location right now as a working parent.
Tax credits and employer benefits you should claim before missing out on savings
- Claim the Child and Dependent Care Tax Credit: For 2025, you can claim 20% to 35% of qualifying expenses up to $6,000 for two children per the IRS. Starting in 2026, the maximum credit percentage rises to 50% under the One Big Beautiful Bill Act, signed into law in July 2025.
- Max out your dependent care FSA: If your employer offers one, you can set aside pre-tax dollars for child care with a contribution limit rising from $5,000 in 2025 to $7,500 in 2026. You cannot claim the same expenses through both your FSA and the tax credit, so plan your strategy carefully to maximize your total combined savings.
- Ask about your employer’s child care perks: Some companies partner with local day care facilities to offer employees discounted rates that can cut your child care bill by 20% or potentially more. Schulz advises asking about every child-care-related benefit because many valuable employer programs go completely unused by the employees who qualify for them.
Care arrangements and assistance programs that could save you thousands annually
- Check federal, state, and local assistance: You may qualify for subsidized child care, free universal pre-K, or income-based sliding-scale subsidies that vary by your specific location and household size. Check eligibility at all three government levels because the rules and income thresholds differ substantially between your state and your county of residence.
- Try nanny shares, co-ops, or mixed setups: Splitting a nanny with another family or mixing licensed part-time care with help from trusted relatives can sharply lower your total annual child care bill. “If you’re fortunate enough to have trusted family and friends who can help, let them,” Schulz advises parents who are struggling with their care costs.
- Negotiate with your provider and flex your work schedule: Some providers offer sibling discounts, financial aid, or flexible payment schedules that can meaningfully reduce what you owe every single month in child care. If you have remote work options, staggering your schedule to cut even one paid day of care per week can save your family thousands of dollars every year.
These tax breaks will not help every family equally, and you need to know the limits
Before you plan your entire budget around the Child and Dependent Care Tax Credit, you should understand one critical limitation of this particular benefit. The credit is nonrefundable, meaning it only reduces the taxes you owe and will not generate a direct refund check for your family if you owe nothing.
If you are a lower-income family that pays little or no federal income tax, this credit provides minimal or zero real benefit for your household finances.
The Tax Policy Center confirms that recent legislative expansions of the CDCTC primarily benefit middle-income and upper-income households rather than the lowest earners. Dependent care FSAs are only available through employers that offer them, and slightly less than half of all U.S. employees currently have this benefit option.
Schulz recommends shopping around aggressively for child care options in your area because costs can vary significantly between providers just miles apart from you. The smartest approach is layering your tax credits, your employer programs, and your provider negotiations together into a single plan for your household budget.
Related: 5 IRS tax breaks that could save your family thousands of dollars
