Pokémon Day Care

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A Pokémon daycare is a place for Pokémon trainers to drop off their Pokémon to be raised in the care of other people, usually an old couple or an old man. Pokémon left at a daycare gain experience based on how many steps the player takes.

In the main series, it is free to put a Pokémon into the daycare and to take it it costs $100 to take it out, plus an additional $100 per level gained while in the daycare.

This is not a preferred method of Pokémon raising for many reasons. Aside from the cost, Pokémon will not evolve while in a Pokémon daycare, though they evolve if raised one level after being taken out of the daycare. The moves Pokémon learn in the Pokémon daycare will be dependent on level - the Pokémon will automatically learn new techniques and forget the old ones, including HM moves. This means that a Pokémon could end up learning a bunch of useless moves, but this can be remedied with the Move Relearner. In addition, a Pokémon can not gain EVs while left in the daycare.

However, daycares are good for two things. One is leveling up Pokémon so that it's easier to record evolutions in the Pokédex, without having to spend much time using the Pokémon in battle. The other use is breeding.

Some Pokémon daycares can keep up to two Pokémon at a time. Pokémon kept there will occasionally breed and have a Pokémon egg, if certain conditions are right. Breeding is not possible at Pokémon daycares that only raise one Pokémon at a time.

In Pokémon Colosseum, leaving a Shadow Pokémon in the daycare will help purify it.

Locations

Pokémon daycares can be found in the following locations:

Route 5 in Kanto (one Pokémon)
Route 34 in Johto (two Pokémon)
Route 117 in Hoenn (two Pokémon)
Four Island in the Sevii Islands (two Pokémon; available only after defeating Elite Four)
Agate Village in Orre (one Pokémon)
Solaceon Town in Sinnoh (two Pokémon)

In the anime

There were several Pokémon daycares shown in the anime, they were the following:

Eggseter in Johto (holds races to give away eggs)
Dewford Town in Hoenn (only contained Mudkip)
Near Saffron City in Kanto