By Dr. Jim Dahle, WCI Founder

There's no doubt that kids are expensive. In 2017, the US Department of Agriculture estimated that it cost an average of $233,000 to raise a child to 18, and I'm sure it's significantly higher now, probably topping $300,000. One of those children is certainly affordable in most doctor families. But if you have four, six, or 13 kids like some of the people in my neighborhood, that total cost may be more than your eventual retirement nest egg! Babies are expensive, but many parents are surprised to learn that kids don't become LESS expensive as they grow; they become MORE expensive.

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Still, a big part of the initial sticker shock of children is childcare. Childcare can be a major expense for many families, even high-income families like white coat investors. But there are a number of options available when it comes to childcare.

 

Child-Free Life

Whether “casados” (married), “juntados” (together), or “solteros” (single), one way to minimize your childcare expenses is simply to not have children at all. With modern methods of birth control, “accidents” don't happen nearly as often as in the past. While some people are childless against their wishes, an ever-growing percentage of people are simply deciding NOT to have any children for various reasons—including a career focus, environmental worries, genetic concerns, mental illness, and a simple lack of desire to raise children. Who can blame them when a significant amount of research indicates that children put stress on marriages and significantly decrease happiness (at least in the short term)? As The Atlantic writes:

“And children can turn a cheerful and loving romantic partnership into a zero-sum battle over who gets to sleep and work and who doesn’t. As Jennifer Senior notes in her book, All Joy and No Fun, children provoke a couple’s most frequent arguments—“more than money, more than work, more than in-laws, more than annoying personal habits, communication styles, leisure activities, commitment issues, bothersome friends, sex.” Someone who doesn’t understand this is welcome to spend a full day with an angry 2-year-old (or a sullen 15-year-old); they’ll find out what she means soon enough.”

 

Stay-at-Home Parent

Many couples opt for the traditional route, having a parent stay home. Traditionally this has been the mother, which makes sense given her unique biological ability to breastfeed, but stay-at-home fathers are becoming more and more common all the time. The rate of stay-at-home parents being men has increased from 11% in 1989 to 18% in 2021.

Typically, a stay-at-home parent takes on the primary child-raising role as well as other tasks like housekeeping, food preparation, shopping, laundry, the care of elderly parents, and the supervision of schooling. Each of these has a significant economic benefit to the family, such that many couples opt to purchase life insurance for the breadwinner AND the homemaker. The only cost is the loss of a second income (although it may also decrease future income for that parent), but once a family takes into consideration the additional value provided at home, the saved childcare expenses, additional work expenses, and taxation, that cost may not be very high at all and can even be negative. There is also the possibility, ever more common these days, that the stay-at-home parent can do some paid work from home (part-time telemedicine, perhaps?) while balancing other responsibilities.

After our eldest was born, Katie left her teaching job and became a stay-at-home parent for many years until she started working for WCI. We credit that decision for many of the successes we've had in life—not only in our family but in my clinical career and with The White Coat Investor. While many in society deride this setup as “trad-wifing,” I think it's important to remember that not all change is progress. There is often a reason that traditional practices became traditional in the first place.

 

School

Perhaps the most common childcare option used by American families today is school. Plenty of stay-at-home parents go back to work when their youngest turns 5 or 6. When I was a kid—and until recently in the area where we now live—the most common option for kindergarten was for a half-day. That doesn't do a lot in the way of childcare for a family with two full-time earners. Full-day kindergarten is the norm now and, increasingly, for preschool. Preschool used to be just for 4-year-olds. Then, for 3-year-olds. And now sometimes it's even for 2-year-olds! This can be really expensive in some areas of the country—as much as $40,000 per year per child. That is still mindboggling to me, but I guess when you're comparing it to the cost of childcare, maybe it's really not all that much (and you get a little education thrown in to boot!). At any rate, if your children are going to public schools, your childcare expenses should drop dramatically when they enter kindergarten, whether the cost you were paying is called childcare or preschool.

 

Traditional Childcare

Hiring someone to watch your child is a commonly used option for single parents and dual-income families alike. Care.com does a cost of care report each year, and for 2024, it reported that childcare costs are basically unaffordable for most families. Here are the numbers:

2024 Child Care Costs

Those are weekly costs, but they add up to about $1,300 a month or almost $16,000 per year per child. The average second child discount is only about 10%, and heaven forbid you have three that need childcare at once. The US Department of Health and Human Services says a family can afford to spend 7% of their income on childcare and still be OK, but the Care.com survey respondents are spending 24% on average and 1/3 of respondents aren't even paying for it from current income. They're having to dip into their savings to pay for childcare. Even on a typical physician income of $300,000-$400,000, $30,000 a year in childcare (two kids) is beyond the HHS recommendation. Single parenting is tough at any income!

Note the “family care center” line in the survey. I believe this refers to in-home (not your home) daycares. These are often cheaper, but the quality is likely a bit more variable, too.

 

Nanny

Traditional daycare doesn't work for many docs, particularly shift workers and those with lots of call. The daycare isn't open at 10pm when the ED calls you to pull someone's poorly chewed steak out of their esophagus, when the labor deck calls to tell you it's time, or when the trauma pager goes off. Most daycares don't open until 8am, close at 5:30 pm, and don't open on federal holidays. You're going to need something a whole lot more flexible. That may take the form of a nanny or an au pair. As you can see in the chart above, nannies cost 2-3 times as much as a daycare. Your child probably gets a lot more personalized care, but it comes at a price that might cost $755 per week x 52 weeks = $39,260. You could save some money with an au pair, but you're still looking at at least half that cost.

Don't forget that you're going to need to file a Schedule H and withhold payroll taxes for your household employee. You may also need another car for your nanny or au pair so they can drive your kids around.

 

Live-in Family

Some families look at prices like that and figure they'd be better off supporting another family member—maybe a mother, a cousin, or a little sister. You could spend $40,000 a year on that person and still break even with hiring a nanny—and hopefully, the family member does an even better job than the nanny would. Plus, it often kills two birds with one stone in that both your kid and the family member get taken care of.

 

Help from Those Who Surround You

This is just cobbling together neighbors, friends, and family to watch the kid. In residency, only two people in our class had kids, and the other resident's wife worked as an ICU nurse. But you know who was available to take care of little Claire when they had overlapping shifts? Katie (and occasionally I) was. As many parents know, it's often easier to care for two kids than one. Maybe it's one neighbor before school, one neighbor after school, your sister on Memorial Day, and your mother-in-law next Saturday, but you work it all out. The price is right, but the hassle factor is high both for you and those who care about you and your kid.

 

Ships in the Night

There is another option, surprisingly frequently employed. I call it the “ships in the night” option. This is where one parent works days and the other parent works evenings, nights, or weekends. They don't see each other much during the week (like ships passing in the night), but there's always someone around to take care of the kid. The tricky part is finding time for everybody to sleep. With two sleep-deprived parents, it's no wonder kids lower your happiness level!

 

Wait Lists

Daycares aren't groceries. You can't just go down to the local Kroger and pick one up. That Care.com survey mentions that 65% have spent time on a daycare center waitlist with 81% juggling multiple waitlists simultaneously and 43% waiting four months or longer. Don't delay finding daycare; it may take your entire parental leave period or more to line it up.

 

HCOLAs

Unfortunately, the numbers in that chart above are the averages. As many docs know, daycare costs a whole lot more if they live in California or New York City. Massachusetts won in a recent survey, with an average cost of nearly $21,000 for out-of-home daycare, about 64% more than tuition at the University of Massachusetts Amherst. It's not getting cheaper either, with daycare inflation running much higher than many other costs, as shown by Business Insider.

 

Government Programs May Help

There are a number of government programs that can help, but they're highly variable by state and city. In Portland, for example, a tax on the wealthiest folks was implemented in 2020 to provide 6-10 hours a day of “free” daycare for everybody else. As a doc or other high-income professional, I'm not sure you're coming out ahead there, but as long as you're paying for it, you might as well take advantage of it. The Childcare Development Block Grant is federal money given to states to help pay for childcare, and it's implemented in different ways in different states.

 

The Child Care Tax Credit

The most significant form of government help is the Child and Dependent Care Tax Credit. This is mostly for kids under 13, but those who are older but can't care for themselves still qualify. You only get the credit if you actually pay expenses for childcare, but note that preschool counts. Basically, you can claim 20%-35% (20% for most white coat investors) of your daycare expenses up to a total of $3,000 ($6,000 for two kids). As  a high earner, if you spent $15,000 on daycare for your kid, you get $1,200 of it back as a tax credit. The credit can actually be refundable for some people. There is no income phaseout, which is nice. This is all claimed on IRS Form 2441:

It's a two-page form, but it looks pretty straightforward to me.

Children are expensive. Paid childcare is particularly expensive, especially for those who cannot use a traditional daycare option. It can still make sense for high earners to remain in the workforce and pay for it, but plan ahead and take advantage of every bit of assistance you can find from friends, family, and the government to help.

What do you think? What childcare options have you chosen to use and why? If you have adult children, how much do you think it cost to raise them?