There is no sugar-coating it: children are very expensive.
Every family’s lifestyle is different, but studies have estimated that it costs parents roughly $250,000 - $270,000 to have and raise one child in Canada from inception to independence in 2023.
Here’s how you can make the financial responsibilities of having a child more manageable:
Start saving as soon as you learn you are pregnant. Many parents-to-be find creative ways to save 25% of their income, and use the remaining 75% for expenses while pregnant and on maternity leave. Unless your employer offers you a parental leave top-up, your EI benefits will only be 55% of your current income. As well, if your income is usually over the maximum annual insurable earnings ($61,500 in 2023), your EI benefit will only be $650 per week… so it is important to save what you can before you take time off work to care for your new arrival.
Update your monthly budget to reflect your income adjustments. This will strengthen your ability to save part of your income and keep financial arguments at bay. You can use a fillable web-based budgeting worksheet like this one to help.
Open a Tax-Free Savings Account (TFSA) for yourself. You can store the income you have saved here instead of in your general savings account. This is effective because it follows the “out of sight, out of mind” adage; you may otherwise be tempted to dip into the extra income you have saved. Further, your money has a chance to grow while it is in your TFSA, providing you have a strong portfolio.
Open a Registered Education Savings Plan (RESP) for your child as soon as possible. This is a great way to save money for a child’s post-secondary education, and is especially important because tuition fees can increase by 6 - 10% per year thanks to inflation. There is a limit on the amount of money you can contribute each year, but if you get started early, you can save a lot of money because yearly contributions can be made up to (and including) the year your child turns 17. The Canadian government also pays a 20% education grant into your child’s RESP each year, which helps to save more! Based on household income, your child may also be eligible to receive additional grants from the government. You can save your child from having to endure years of debt created by student loans with a carefully planned and funded RESP.
When you are ready to open a TFSA and/or RESP account, connect with a trustworthy Certified Financial Planner (CFP®) who will:
- suggest account options and build you a personalized financial plan based on things like your financial goals, income, expenses, lifestyle, risk tolerance and more;
- have the necessary tools and professional relationships to help you build the net worth required to support your family;
- meet with you regularly to review your finances, make adjustments to your plan if needed, and help keep you on track.
Finally, statistics show that the average household with an FA for 15 years or more had asset values 131% higher than an average “comparable” household without a financial advisor, so we will repeat ourselves: we urge you to connect with a trustworthy CFP® to complete your financial plan.
Our team is happy to help you get started. For assistance, please contact us.