Taking vulnerable children into care earlier could save on emotional and financial costs, a study suggests.
Delays in removing such children from their families are linked with poor mental health and behaviour, say researchers from the Demos think tank.
The report, funded by Barnardo's, says the care system should be de-stigmatised and seen positively.
It says the state can pay nearly £33,000 more per child per year if they have received poor care.
The research involved statistical analysis as well as interviews with foster parents, children in care and young people who had been in care.
It compared two extreme hypothetical "care journeys" and found that the annual costs to children's services could be up to twice as much for a child who had experienced a lot of upheaval and change.
And it also looked at the costs to the state from when a child left care to the age of 30 and found they could be up to five times higher if a child had received poor support.
"This demonstrates that if care is used earlier and more effectively it becomes a means of real cost avoidance," the researchers said.
Celia Hannon, one of the authors of the report, said: "Government must urgently address the factors that affect a child's experience of being in care.
"That means focusing more on working with families at an earlier stage and minimising the instability resulting from indecision and lengthy processes."
The report says the state should be recognised as being capable of acting as a "parallel parent" and the care system should be de-stigmatised and seen as a "positive form of family support".
And tougher guidance should be given so there were fewer "failed family reunifications", which the researchers say can damage children's mental health.
The authors call for foster carers to have training about mental health so they can support troubled children. They should also get time away from the children.
They say they found an association between a poor, unstable "care journey" and poorer mental health and educational achievement, but did not have the long-term data to try to establish causal link.
Rise in care
Martin Narey, chief executive of Barnardo's, said: "Many believe that care is always second best to the care provided by parents. Contrary to popular belief, and for all its inadequacies, care does make things better and can and does create stable, nurturing environments for children.
"We must urgently adopt a more pro-active and positive use of care, one where care is used earlier and more effectively so it becomes a means of real cost avoidance."
Applications for children to be taken into care have risen since November 2008, when two men were found guilty of causing the death of toddler Peter Connelly, identified at the time as Baby P.
The 17-month-old died from injuries including a broken back, despite being on the at risk register and being seen by social workers and other professionals on 60 separate occasions.
His mother, her boyfriend and their lodger were all jailed over his death.
According to Cafcass, the children's court advisory service in England, 8,524 applications for children to be taken into care were made in 2009 compared with 5,968 in 2008.