Each year the Federal Reserve asks Americans about their financial well-being. In the latest survey released the week of May 20, the share of adults that reported being financially OK was mostly unchanged from last year with one notable exception: parents.
No, the parents are not alright, according to the latest Fed survey. The share of adults living with their own kids under age 18 who say they are doing at least OK financially dropped 5 percentage points in one year. At 64%, it is the lowest share of financially OK parents since the Fed started breaking this down in 2015, and it is 11 points lower than the 2021 high of 75%.
The widening discrepancy between parents of children and all other adults can be reasonably explained with one word: child care.
For parents paying for child care, the Fed said they typically spend the equivalent of 50%-70% of their monthly housing payment on child care costs. The Fed compares these two things because a housing payment is usually Americans’ single biggest monthly expense.
The Fed said the median child care expense is $800 a month and $1,100 for those needing 20 or more hours per week.
The results are even worse in a new report by Child Care Aware of America. The report said the average cost of child care for two children is now greater than the average rent in all 50 states.
The plight of parents is a big reason legislation that would expand the Child Tax Credit soared through the House 357-70. The bill would increase the maximum refund per child to $1,900 for the 2024 tax year and $2,000 for 2025. Based on the math above, that is about two months of child care expenses.
However, the Senate has yet to vote on the bipartisan bill, taking issue with some of its provisions. Without the expansion, the maximum refund of the existing child tax credit is $1,600.