Childcare costs require $400K income for affordability in the United States, according to a recent analysis by LendingTree. The finding highlights the widening gap between household earnings and the rising cost of raising young children.
Federal guidelines define affordable childcare as costing no more than 7 percent of a household’s income. Using data from Child Care Aware of America, LendingTree calculated that the average annual cost of care for an infant and a 4-year-old is $28,190 nationwide. To keep that expense within the 7 percent threshold, a household would need to earn $402,708 per year.
By comparison, the average income for a two-child household stands at $145,656. That gap implies families would need a 176 percent pay increase to meet the affordability benchmark.
When a $28,000 Bill Becomes a Middle-Class Squeeze
The numbers underscore how childcare has shifted from a manageable expense to a central financial strain. Even in states with relatively lower costs, affordability remains out of reach.
In South Dakota, the least expensive state in the study, annual childcare costs total $16,702. Yet families there would still need to earn roughly $238,600 to meet the 7 percent guideline, nearly double the state’s average income for similar households.
In 20 states, families would need at least triple their current average income to comfortably afford childcare. Hawaii leads the list, followed by Nebraska and Montana, where the income required exceeds 250 percent of average household earnings.
These disparities illustrate a broader structural issue. While wages have grown in nominal terms, essential expenses such as housing, healthcare, and childcare have risen faster in many regions, eroding purchasing power for middle-income families.
Affordability and America’s Falling Birth Rate
The strain of childcare costs is unfolding against a backdrop of declining birth rates. Data from the Centers for Disease Control and Prevention show that the U.S. fertility rate fell to an all-time low in 2024, dropping below 1.6 children per woman.
Preliminary figures indicate that just over 3.6 million births were recorded in 2025, roughly 24,000 fewer than the previous year. The trend reflects a long-term decline that economists and demographers increasingly link to economic pressures.
When childcare consumes a significant share of income, families may delay or forgo having additional children. The cost calculation is no longer limited to diapers and groceries, but extends to years of formal care during prime earning years.
Stark Gaps Across States and Communities
The affordability challenge is not evenly distributed. According to the LendingTree analysis, American Indian and Black families would need more than 300 percent in income increases to meet the 7 percent benchmark. White families would need 147 percent more income, while Asian families would need nearly 95 percent more.
These disparities reflect differences in median income levels as well as regional cost variations. They also raise broader questions about access to workforce participation. When childcare costs approach or exceed one parent’s take-home pay, families may reduce working hours or exit the labor force entirely, with long-term implications for earnings and retirement savings.
A Broader Cost-of-Living Reckoning
Childcare is only one component of a wider affordability debate. Although headline inflation has cooled and wages have posted steady gains, many households report persistent financial pressure.
Some analysts argue that traditional measures understate the strain. In a widely circulated analysis, Michael Green of Simplify Asset Management suggested that federal poverty metrics, originally designed in the 1960s and heavily weighted toward food costs, fail to capture modern spending patterns.
He estimates that housing now accounts for 35 to 45 percent of household budgets, childcare for 20 to 40 percent, and healthcare for 15 to 25 percent. Under that framework, the effective income floor for financial stability could be far higher than official thresholds suggest.
Coping Strategies, Limited Relief
To manage expenses, families are increasingly turning to employer-sponsored dependent care flexible spending accounts, adjusting work schedules, or exploring shared arrangements such as nanny co-ops and mixed informal care.
Some providers offer sibling discounts or sliding-scale fees, but such measures offer incremental relief rather than structural change.
Absent policy reform or significant shifts in labor market dynamics, the affordability gap may persist. For many households, the math remains stark. If childcare costs require $400K income to be considered affordable under federal guidelines, the definition of middle-class security may need reconsideration.
