5 Factors Contributing to the Middle Class Squeeze

5 Factors Contributing to the Middle Class Squeeze

For middle-class Americans, it seems like "expensive" is the new normal.

According to new figures from the Center for American Progress, the combined costs for health care, day care, housing and savings—for both college and retirement—for a family of four jumped some 32% between 2000 to 2012.

The real rub? In the same period, income figures barely rose at all.


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If you're shaking your head is disbelief, we've got the proof. Here’s the breakdown of changing costs in a few major categories, courtesy of the Associated Press.

1. Health Care

Average out-of-pocket health care costs for a family of four covered by employer-sponsored health plans rose a whopping 85% between 2000 and 2012 to $8,600 a year. What's more, only half of these Americans in 2002 had to pay deductibles, while 75% did by 2011.

As a result, Americans are spending more of their take-home cash on medical bills. Between 2000 and 2013, health care spending in the U.S. rose 1.7%, according to data from the Labor Department.

2. College

A typical family with two kids needed to save an average of 39% more to pay for college in 2012 than they did back in 2000, based on costs for four-year public schools. (And that's after you factor in financial aid.)

Tuition and fees at these schools rose 86% in the same time period—a significantly sharper increase than the 52% bump that occurred between 1988 and 2000.

3. Child Care

If you thought the cost increases for health care and higher education were scary, get ready for this one. Child care costs have now risen so high—an average of 37% in the past 12 years—that they exceed typical costs for renting a home in every single state. Ouch.

4. Housing

Speaking of housing, this expense for four-member families jumped 28% in the past 12 years, which probably explains why mortgages fell to a 17-year low earlier this year.

5. Savings

Rising costs, coupled with lower savings rates—median net worth for families in the middle 20% of incomes dropped 17% to $55,400 in 2013, compared to $66,600 in 2010—paint a dire picture for the average American family.

But there's still hope for a healthier financial future. You can start by re-adjusting your budget to accommodate these rising costs, using our one-number strategy.


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