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Child care costs in the United States are higher than anywhere else in the world. Figures from the Organisation for Economic Co-operation and Development (OECD) from 2022, the most recent available, show American parents pay the highest net child care costs as a percentage of their wages.
And this problem is persistent. According to a 2025 Northwestern Mutual study, 36% of young Americans (Generation Z and millennials) saw their child care costs increase in 2025. For those who experienced a cost increase, 48% of them said the increase had a major impact on their overall financial well-being.
That makes sense given that two-thirds of Gen Zers and millennials who have at least one child spend at least as much on child care as they do on housing.
Key Takeaways
- More than a third (36%) of young Americans (Generation Zers and millennials) saw their child care costs increase in 2025.
- Experts stress that taking on debt is not the answer to funding these rising costs. Budgeting, finding secondary income sources, and cost-cutting are better methods.
- When even those methods don’t do the trick, out-of-the-box solutions such as moving states, cohabitating with friends, or sharing child care costs and responsibilities with neighbors are becoming more common.
Ditching Debt
The rise in child care costs has young Americans stressed. According to the Northwestern Mutual study, 29% of Gen Zers say that having children is one of their greatest affordability concerns. It was the second most common concern after buying a house, which 46% of Gen Z lists as a top financial concern. By contrast, only 16% of millennials are concerned about the financial cost of having children, while 31% have concerns about being able to buy a house.
According to a survey by Bankrate, 45% of American parents who planned to pay for summer child care in 2021 anticipated taking on credit card debt to do so.
However, experts warn that this stress shouldn’t result in young Americans making risky financial decisions—such as going into debt—to fund sky-high child care costs. Experian notes that personal loans are advisable to solve short-term financial hardships, not basic living costs. Instead, budgeting and perhaps getting a side hustle are more advisable options.
Stacey Black, the lead financial educator at Boeing Employees’ Credit Union (BECU), advises that parents-to-be actually pay down their debt before their baby enters the picture.
“Assess your financial situation. If you are already in debt, use a debt calculator or speak with a financial professional to clearly understand your current obligations. Then, reduce your debt by paying more than the minimum, being conscious about spending choices, and getting assistance if necessary,” she said.
Balancing Your Budget
How can parents make smart spending choices to incorporate the costs of child care?
“When it comes to mitigating the high costs of raising a child, it’s important to structure a budget in terms of one-time (stroller, car seat), recurring (diapers, formula), and occasional (toys, hygiene supplies) expenses,” Black said. “Budgeting in this way ensures that new parents have full visibility of the different costs that will impact them throughout the different stages of their baby’s first months and years, so they can plan and save accordingly.”
She said new parents can trim costs by buying secondhand baby clothes and items that grow with your child, such as adjustable strollers.
“Beyond the necessary baby items, there are several ways for new parents to avoid debt as they grow their family,” Black said. “Resist the urge to make emotional purchases, such as buying that adorable new baby outfit or a high-end stroller on impulse.”
Black said switching to a family-specific, Affordable Care Act-subsidized health insurance plan could save money. She also recommended that parents set up regular, automatic transfers to a savings account to help them cover unexpected expenses such as medical bills or a hospital stay.
“If your baby hasn’t arrived yet, practice living on your future budget for several months. This ensures you have enough money to live on and can still achieve important financial goals like adding to emergency or retirement savings,” she said.
Big Changes
If budgeting and saving aren’t enough to cover the cost of child care, then parents might have to think about making major life shifts. Moving closer to a relative or friend who can step in, for example, is a common decision for parents.
If that isn’t an option for you, maybe consider moving to a state that subsidizes child care for all families or low-income households. There are also several citywide programs that make child care more affordable.
Still, the prospect of uprooting their lives or taking on a second job is simply not feasible for many parents. Some parents have taken to child-rearing tactics that decenter the nuclear family, such as moving in with friends who are also parents or sharing child care responsibilities and costs with neighbors.
The Bottom Line
The cost of child care is a big—and growing—issue for American families. While it might be tempting to take on debt to make ends meet, experts advise against it, with budgeting and cost-cutting being preferable tactics.
For families who struggle to keep costs in line, drastic options like moving closer to family, moving to states or cities with subsidized care, or engaging with friends and neighbors to share responsibilities might prove to be helpful options.
