No one has told you that having a baby is super inexpensive, and if they did, they are definitely telling you that as a joke. The average cost to raise a child to the age of eighteen in Canada is the not at all small sum of $243,660. This amounts to about $13,500 per year (and probably more in the early years for more surprise expenses) or about $1100 per month, and that’s per child.
In other words: it’s not inexpensive at all, but that’s ok because we’ve put together some key tips to help you out and set you up for both pre-baby budgeting and financial planning.
Babies require a lot of different items when they are born. From bottles to buggies and everything in between, you’ll need to account for what will be essential to your child and what can potentially wait.
It’s also a good idea when shopping to know exactly how much you can budget for any one item. For instance, is it really necessary to buy a stroller with extra drink storage and a built-in phone charger? Instead, could you settle for one that simply moves smoothly and holds your child comfortably? The savings you could attain by buying lower-priced items could help towards buying a more expensive item like a car seat or crib.
Ask around as well, some people may have used items that are just collecting dust in storage that would work well for you. Online market boards like Facebook marketplace and your local city’s classifieds are also a great place to find used items.
Setting Up Savings Accounts
Start saving right now. Do it. It’s easy to get caught up in the baby hype and start buying baby items or cute clothes right away, but hold off until your savings accounts are set up. If you haven’t already opened one, consider opening a Registered Retirement Savings Plan (RRSP) or Tax Free Savings Account (TFSA).
Each are helpful in their own way. An RRSP will help you settle down for retirement while a TFSA is meant to put savings away you won’t often touch. Plus, with TFSAs you don’t have to pay taxes when you withdraw funds.
After your child is born, you can also consider opening a Registered Education Savings Plan (RESP). A RESP will help you to save for your future child’s post-secondary education and the government will typically contribute money to help you save as well. This is an especially important one to consider since university and college can be very expensive and reducing your child’s need for student loans can go a long way to set them up financially in the future.
It’s a good idea to investigate the nitty gritty of each savings account by asking a financial advisor on what’s best for your situation.
Plan with Maternity or Paternity Leave in Mind
Understand how the company you work for offers maternity or paternity leave. While most organizations have incorporated maternity leave into them, paternity leave still has a bit of a stigma associated with it and may not be offered by your workplace. In either case, understanding how much funding you will continue to receive once on leave will help to determine your finances so make sure to take this into account to get a full picture on your financial stability.
Life Insurance and Wills
And now the sad section of our blog, but a crucial one. Now that you have a child coming into the world, you need to consider how it will affect them and your family financially if you pass away. Life insurance and wills are how to ensure that they are taken care of and can still live as comfortably as possible.
For those that don’t know, life insurance is an amount that is paid out by the insurer in the event of the payee’s death. Of course, like most insurance, this involves paying monthly or yearly premiums.
A will is a legal document that outlines your wishes in the event of your passing. It also covers two particularly important items as an upcoming parent: who will take care of your children (if they are still considered minors) and how your assets are distributed.
If you pass away without a will, the situation is referred to as ‘intestate’ and the courts decide on your possessions and children. This is even more incentive to get the hard stuff out of the way and either hire a lawyer to help you complete your will or use an online legal will platform to help you out.
Financial planning for your child’s future is important to take seriously. Any baby requires a lot of work and plenty of baby-related items in order for them to have the best possible development. Ensure your child has the future you hope for them by planning properly financially.