The Childcare-Debt Squeeze: States Where Families Feel It Most

In most states, childcare is the biggest expense after a mortgage. The average family with an infant and a four-year-old spends more than $25,000 a year on childcare before paying for rent, groceries and gas. In states like Vermont and Minnesota, caring for two children consumes more than 45% of median household income.

But childcare is only part of the story.

MoneyLion’s latest study reveals that it’s not just childcare costs that burden households, but also the debt they’re carrying at the same time. Colorado ranks as the most financially stretched state, with families paying an average of $37,832 a year for childcare while carrying $155,945 in consumer debt.

Childcare is getting more expensive and debt remains a reality for many households. Here's how your state stacks up.

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Key Findings

• “Affordable” states are still expensive for childcare. Kansas and Iowa are ranked as affordable, but childcare still costs 22% to 24% of median household income.

• In some states, childcare costs more than a mortgage. In Massachusetts, families with two kids in childcare will pay $3,721 per month, totaling $44,648 annually.

• Debt load can make childcare costs even worse. In Hawaii, households carry debt equal to just over twice their annual income, while childcare for two consumes more than 36% of the state's median income.

• The childcare cost gap between states is substantial. Families in Massachusetts spend an average of $44,648 a year on childcare for two children, compared with $13,119 in Mississippi — a difference of $31,529 annually.

The States Where Childcare and Debt Stretch Families the Thinnest

Is your state squeezing you in both ways with childcare costs and debt? States are ranked from most to least financially stretched using a weighted combination of childcare costs, consumer debt and debt-to-income (DTI) ratios. Find out where your state ranks.

Childcare Is Expensive. Debt Makes It Worse.

The numbers tell a staggering story about childcare costs. If you’re part of a two-income household and aren’t the breadwinner, there’s a good chance a large share of your income is going toward childcare.

The other concern is what happens when the monthly math doesn't work.

• In states like Minnesota and Vermont, almost 45% of the median household income is dedicated toward childcare.

• After paying for childcare, many families still need to cover rent or a mortgage payment, groceries and other day-to-day expenses.

• That leaves little breathing room for families to save or invest.

Lower-income earners will likely face another challenge. The gap between what they earn and what it costs to cover daily expenses will only widen.

• Since higher-income earners can afford higher childcare rates, these daycare facilities may raise rates.

• Those monthly childcare payments work against lower-income earners. Essentially, they have to somehow pay for this care just to keep their jobs.

Childcare costs are staggering, but consumer debt compounds mounting expenses.

• In states like Hawaii and Colorado, the average household is carrying between $148,000 and $155,000 in debt.

• This forces households to rely on loans and credit cards to bridge the gap.

• It may create a never-ending debt cycle, and households may be faced with dipping into savings.

The Domino Effect: When Childcare Costs Push Everything Else Off the Table

As a certified financial health counselor, I know these numbers have a domino effect on families in other ways. Many families are pushed to delay milestones like saving for a down payment on a home or a car or even building a long-term financial fund.

Because of childcare costs and carrying debt, there are tradeoffs.

Families are unable to invest or save for retirement. In many states, it costs more than $100,000 annually to retire comfortably. This leaves households in a quandary.

One question that may plague households: Is it worth working if most of my paycheck goes to childcare costs? But then the other question becomes: If I stop working, how will we pay off our debts?

Many households will find themselves stuck, and this may lead to financial burnout.

Real Financial Advice for Parents Who Are Already Doing Everything Right

When childcare costs and debt burden are high, “save more,” “relocate” or “pay less for rent” isn’t the advice that you need. Here are six tips that can help parents manage their finances more effectively.

• Always file your taxes, even if you do not owe taxes: You can claim “invisible” income via federal tax credits. Maximize your child and dependent care tax credit and the earned income tax credit on your return. You may get a refund of $3,000 to $6,000.

• Protect your credit score: When budgets are tight and DTI is high, do what you can to boost your credit score. Automate what you owe month-to-month, so you don’t miss a payment, and limit hard inquiries on your credit. If you need to borrow money for a financial emergency, you can get a personal loan instead of a payday loan. Keep your score around 700 or higher, so you have options to get a low annual percentage rate (APR). 

• Consider a community co-op for childcare: Facilities will charge more than private childcare. One way to lower your costs is to consider pairing with a neighbor and sharing a babysitter to cut down on monthly childcare expenses. Or if you work part-time and your surrounding neighbors do too, take turns watching each other’s children as an option.  

• Inquire about state-subsidized childcare: Since childcare costs in many states account for 35% to 40% of a family’s household budget, many states are raising their income limits for financial aid. Check your state’s Department of Human Services portal.

• Ask your employer about a dependent care flexible spending account (FSA): If your employer offers an FSA, you can set aside up to $5,000 for childcare without paying taxes.  

• Consider a billing date realignment: You don’t have to accept the payment date that a corporation assigns you. You can spread out due dates over the course of a month so that you aren’t frontloaded with debt.  

Methodology

To find where parents are stretched the thinnest from both debt and childcare costs MoneyLion found the following for all 50 U.S. states: (1) average total consumer debt as source from Experian’s 2025 data; (2) DTI ratio for 2025 Q1 sourced from the Federal Reserve; (3) average annual cost of infant care sourced from Economic Policy Institute (EPI); (4) average annual cost for a 4-year-old as sourced from EPI; (5) average childcare for two children (infant and 4-year-old); (6) percent that median families’ income goes toward average annual cost of infant care; (7) percent median families’ income goes toward average cost of childcare for a 4-year-old; (8) percent median families’ income goes toward average annual cost of childcare for two children; (9) percent median household income goes toward average annual cost of infant care; (10) percent median household income goes toward average annual cost of childcare for a 4-year-old; and (11) percent median household income goes toward average annual cost of childcare for two children. With this data collected, MoneyLion was able to score each factor and combine them to rank the states, with the lowest score being best. In final calculations, factors (1) and (2) were weighed 1.5x, and factors (6) through (11) were weighed 0.5x. All incomes were sourced from the 2024 American Community Survey conducted by the U.S. Census Bureau. All data was collected and is up to date as of May 21, 2026.

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