Not only are child-care costs going up, but perhaps not coincidentally fewer families are paying for it, according to a new report from the U.S. Census Bureau. These trends not only suggest shifts in child care, but suggest the strained ability of a new generation of Americans to save.

“The numbers and ages of children and the rise in mother’s labor force participation throughout the 1980s and 1990s helped to increase the demand and need for child care,” says the report, called Who’s Minding The Kids? Child Care Arrangements: Spring 2011. But with child-care costs almost doubling since 1985, that means families are looking at a patchwork of child-care options.

In 1985, families whose mothers were employed spent about $84 a week on child care (in inflation-adjusted dollars). That rose to $143 a week in 2011. The average cost spiked from $124 to $142 between 2005 and 2010.

At the same time, fewer mothers are shelling out for child care. Only 6 million (32 percent) of 20 million moms who worked for an employer made a cash payment for child care for at least one child. In 1997, about 42 percent of families made some kind of cash payout for it.

But even though the costs are higher, the percentage of monthly household income going to child care has stayed the same since 1997, hovering around 7 percent since the mid-1980s.

Client Concerns

So what effect is this having on financial advisor clients?

“It definitely affects younger clients and it doesn't seem to be going down in cost anytime soon,” says Samantha Fraelich, the vice president of Bernard R. Wolfe & Associates in Chevy Chase, Md., a firm that has about 30 to 40 clients with younger children. “With more families having more than one parent working, child care seems to be in great demand. Many are choosing to use dependent care programs some employers offer.”  

Fraelich says she even has one client who runs an online business in addition to working so that she can pay for the cost of child care.

Cue Grandma And Grandpa

Also stepping up to fill the child-care gap are family members.

“Since 1997, the use of organized day care centers and father-provided care have increased, while the proportion of children in nonrelative care in the provider’s home has decreased,” says the Census report.

“We have seen many participate in ‘nanny shares’ with neighbors or other family members,” Fraelich says. “Grandparents are also becoming more involved in the child-care issue.” 

In fact, preschoolers get a lot of help from grandma and grandpa, according to the Census Bureau: 24 percent of them got regular grandparent care in 2011, rising from 21 percent in 1997, the bureau says. Eighteen percent were taken care of by fathers in 2011 as mothers worked.

The study also found a fewer number of latchkey kids. The Census Bureau says that only one kid in seven watched himself regularly while living with a single working parent in 2011. That’s down from about one in four in 1997, or a decline from 7.3 million to 4.2 million kids. The study suggests that the increasing number of after-school programs have played a role in that decline.

A Huge Chunk

Child-care costs eat up a huge chunk of household income. According to a study last year by Child Care Aware of America, center-based child-care fees for babies outpaced annual rent in 22 states and the District of Columbia. Throw in a 4-year-old kid, and the fees outstripped rent in all 50 states. In 20 states and D.C., a family with two kids also paid more in center-based child-care fees than they did for in housing costs if the parents were mortgage holders. In 35 states and D.C., caring for an infant at a child-care center or a family child-care home cost more than a year’s worth of in-state tuition at a four-year college.

Child Care Aware of America’s report is called Parents and the High Cost of Child Care.

“Working parents are caught in a bind—they need child care to continue to work and support their families, but costs keep going up, stretching family budgets to the limit,” said the report.

Again, parents are responding, says the organization, with a patchwork of solutions. “Nearly 30 percent of children under age 5 today are in multiple child-care settings every week,” says the organization.

Child Care Aware of America added that the average annual cost of full-time child care for an infant in a center in 2011 ranged from nearly $4,600 in Mississippi to nearly $15,000 in Massachusetts. The average cost was more than $10,000 a year in 19 states and D.C.